Only interest accrued on 60% of the contributions to the Employee Provident Fund after April 1, 2016 will be taxed while the principal amount will remain tax exempt, revenue Secretary Hasmukh Adhia clarified on Tuesday after uproar over the government’s proposal to tax withdrawals from the Employee Provident Fund (EPF).
Adhia said the Budget proposal to tax 60% of employee provident fund (EPF) withdrawal will affect less than one-fifth of employees with high salaries. The proposal, he said, is to tax the interest accrued on PF contributions made after April 1, 2016
Small salaried employees with up to Rs 15,000/month income will be kept out of purview of proposed taxation of EPF, Adhia further said.
This 60 per cent will also be tax exempt if it is invested in a pension annuity schemes, he said. “This is not a revenue mobilisation exercise,” he added.
Adhia said that no part of PPF will be taxed and the present scheme of investment up to Rs 1.5 lakh in a year will continue to be tax exempt. PPF on withdrawal will continue to be out of the tax ambit.
