Arun Jaitley’s Budget 2016 on EPFO: 60% of Provident Fund corpus to be taxed
EPF tax: However, in EPFO, there are about 60 lakh contributing members who have accepted EPF voluntarily and they are highly - paid employees of private sector companies. For this category of people, amount at present can be withdrawn without any tax liability. Such employee can withdraw without tax liability provided he contributes 60 percent in annuity product so that pension security can be created for him according to his earning level. However, if he chooses not to put any amount in Annuity product the tax would not be charged on 40 percent.
Arun Jaitley's Budget 2016 on EPFO: Arguing for parity in tax treatment of different pension plans, Budget 2016 proposed that only 40 per cent of the accumulated corpus of all contributions made on or after April 1, 2016 by an employee in a recognised provident fund, superannuation fund and NPS, would be exempt from tax. “In order to bring greater parity in tax treatment of different types of pension plans, it is proposed to amend section 10 so as to provide that in respect of the contributions made on or after the 1st day of April, 2016 by an employee participating in a recognised provident fund and superannuation fund, up to 40% of the accumulated balance attributable to such contributions on withdrawal shall be exempt from tax,” it was proposed.
EPF tax: There is no change in the existing tax treatment of Public Provident Fund (PPF). Currently, there is no monetary ceilings on the employer contribution under EPF with only ceiling being that it would be 12 percent of the salary of the employee member. Similarly, there is no monetary ceiling on the employer contribution under NPS, except that it would be 10 percent of salary.
2. Arun Jaitley on EPF tax row: The EPFO has about 3.7 crore members of which about 3 crore members are those in the earning category of Rs 15,000 and below (statutory wages). For them there is no change. It is only those private sector employees who have just joined that this will impact them.
3. Arun Jaitley on EPF tax row: Now there has been some reactions. When the debate comes up in Parliament I will give the government's response as to what decision we finally take in this matter.
MONEY CANNOT BE WITHHELD BY EMPLOYER
If you had a bitter parting with your employer and are afraid that your employer will block the amount by not completing the withdrawal formalities, take it easy. Your employer cannot block the provident fund amount legally. It is your money and it does not remain with the employer. It is with the Employees Provident Fund Organsiation (EPFO). If your employer is adamant you can send a legal notice. Ultimately, and the employer will have to complete formalities to let you avail of the corpus.
2. EPF tax in Budget 2016: "The purpose is not to mobilise revenue. We want people to move towards a pension society. So we have given another incentive wherein the investment in annuity product will be tax exempt. Annuity product was always taxable. But here, even after death of a person when the money is transferred to legal heir, we have made it tax exempt," Adhia explained.
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ANALYSIS / EXPERT COMMENTS
- Meghnad Desai
India needs a body like the UK’s Office of Budget Responsibility
- Anita Rastogi
In addition to simplifying the taxation structure, implementation of the GST regime will help eliminate most indirect tax issues
- Nirvikar Singh
Repressive regimes fail to deliver inclusive and substantive economic growth
- Anwar Shirpurwala
Extend duty incentives for mobile phones and tablets to all Information Technology Agreement goods
- Eric Mehta
Will this Budget be an enabler for ‘Make in India’, ‘Make for India’ and, most importantly, ‘Make India’ is something that will soon be answered