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Budget 2016 on pension: Income tax exemption raised from Rs 1 lakh to Rs 1.5 lakh

Wed March 02 2016, 7:33 am
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    Budget 2016 on pension: FM Arun Jaitley said PM Narendra Modi government will rationalise the pension sector by a uniform treatment and he has proposed to raise the income tax exemption limit from Rs 1 lakh to Rs 1.5 lakh for annual contribution in a superannuation fund and also non-levy on taxes upon the death of an employee under NPS (National Pension Scheme). Besides, 40 per cent of the pension wealth under NPS will be exempted from tax. (Image Source: Reuters)

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    Budget 2016 on pension: Arun Jaitley proposed to provide a uniform tax treatment to the recognised provident fund, National Pension System and superannuation fund while he was presenting Union Budget 2016-17 in Lok Sabha on Monday. (Image Source: Reuters)

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    11. Income tax exemption limit: Loan Principal Repayment - The equated monthly instalment (EMI) is made to home loan consists of two components – principal and interest. The principal component of the EMI qualifies for deduction under Sec 80C, whereas the interest component is eligible for tax savings under section 24 of the Income Tax Act. (Reuters)

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    Budget 2016 on pension: Among others, a monetary limit of Rs 1.5 lakh will be provided for annual contribution in a provident fund and exemption for one-time portability from provident fund or superannuation fund to National Pension System (NPS). (Image Source: Reuters)

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    Budget 2016 on pension: Arun Jaitley also proposed that 40 per cent of the pension wealth of an employee under NPS will be exempted from tax. "It is also proposed the exemption under the recognised provident fund and superannuation fund will be limited to 40 per cent of the accumulated amount arising out of contributions made in such funds on or after April 1, 2016.

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    4. EPF tax in Budget 2016: "There is no change in the status of public provident fund (PPF). EEE (tax exempt at the time of contribution, tax exempt on returns and tax exempt on withdrawals) scheme will continue for PPF," he said. "There is no 40 per cent limit on PPF. It will be 100 per cent exempt". Adhia said out of the 3.7 crore active contributors in EPF, about 70 lakh corporate sector employees with high salary would be impacted by the proposed taxation of EPF interest on withdrawal.

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    Budget 2016 on pension: Besides, to help India moved towards greater pension coverage, the government has also done away with the levy of service tax on annuity under the NPS run by Pension Fund Regulatory and Development Authority of India (PFRDA).

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