Government clears air on EPF, may go for partial rollback
Coming under criticism on the issue of taxing provident fund withdrawals, the Government on Tuesday promised to consider demands for a partial rollback of the proposal to tax 60 per cent of withdrawals from provident fund and a ceiling on employers’ contribution. It also made it clear that the public provident fund, PPF will continue to be tax exempt. “There is no change in the status of PPF.
EEE (tax exempt at the time of contribution, tax exempt on returns and tax exempt on withdrawals) scheme will continue for PPF,” Revenue Secretary Hashmukh Adhia said on Tuesday.
Clearing the air on a proposal in Budget 2016 to tax employee provident fund withdrawals, Revenue Secretary Adhia said only 60 per cent of interest on contributions made after 1st of April this year will be taxed and that the principal amount of contribution will remain untouched at the time of withdrawal.
Finance Ministry in a release said, the new tax proposal is aimed at taxing only the high salaried individuals who constitute about 70 lakh people, out of the 3.7 crore employee provident fund (EPF) members. It said, about 3 crore individuals come under the statutory wage limit of Rs 15,000 per month so will not be affected by the proposed changes.
In a release the Finance Ministry said, it has received representations from various sections suggesting that if the amount of 60 per cent of corpus is not invested in the annuity products, the tax should be levied only on accumulated returns on the corpus and not on the contributed amount. The Ministry has also received representations asking for not having any monetary limit on the employer contribution under EPF, because such a limit is not there in NPS (National Pension System). The release said, the Finance Minister would be considering all these suggestions and taking a view on it in due course.