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EPF tax in Budget 2016: From EPF interest to PPF tax exemption, top 5 points to know

Wed March 02 2016, 12:45 pm
  • epf tax, epf tax budget, epf tax on withdrawal, epf tax 2016, epf tax benefit, epf tax rules, epf tax deduction, epf taxable, epf taxable income, epf new rules, epf new rules 2016, epf new rules budget 2016

    EPF tax in Budget 2016: With PF withdrawal tax proposal in Arun Jaitley's Budget 2016 causing a controversy to break out across the country and the social media erupting in fury plus the trade unions threatening a strike, the Narendra Modi govt rushed to clear the air. An official said as far as taxing provident fund (PF) withdrawals was concerned, PPF withdrawals will continue to be fully exempt from income tax and that only the interest accruing after April 1, 2016 on 60 per cent of the contributions made to Employee PF (EPF) will be taxed. Here are the top 5 reasons why the govt has proposed this move that has shaken the world of employees:

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    1. EPF tax in Budget 2016: All contributions and interest accrued to employee provident fund (EPF) before April 1, 2016, will not attract any tax on withdrawal. Withdrawal of principal amount contributed to EPF after April 1 would also remain exempt from any tax. It is only the interest on contributions made after April 1, 2016 which will be taxed, Revenue Secretary Hasmukh Adhia said in an interview here.

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    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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    3. EPF tax in Budget 2016: "We are worried about people blowing off the entire 100 per cent amount on retirement and not investing in pension products. Otherwise, the responsibility comes on government to take care of healthcare," Adhia said. (Reuters)

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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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    5. EPF tax in Budget 2016: Explaining further Adhia said the government proposes to change the provision not to take tax from salaried class, but to help people plan for retirement better. "We are saying, 40 per cent of it (EPF amount) will be available at the time of retirement. For the remaining 60 per cent, we want to encourage you to invest in annuity product. (Reuters)

  1. I
    indira
    Mar 2, 2016 at 7:30 am
    The Government is trying to fool people in order to please private Insurance Companies and Mutual Fund Houses. In the year September 2014, The government brought notification to deny Pension fund membership under the Employees Pension Scheme 1995 ( EPF) to those employees which initial pay of more than Rs 15000. Therefore the argument of the Government that thy want to encourage pension society by taxing EPF withdrawal is hollow. Also: Government and Economists wants EPFO to invest in equities saying it will give more return on investment. EPFO now says, it can give 9% interest and still have surplus in the corpus. Government says “NO”. Reason – Government wants to reduce interest rates on small savings. Therefore Please understand the reasons behind such move.
    Reply
    1. I
      indira
      Mar 2, 2016 at 7:31 am
      The Government is trying to fool people in order to please private Insurance Companies and Mutual Fund Houses. In the year September 2014, The government brought notification to deny Pension fund membership under the Employees Pension Scheme 1995 ( EPF) to those employees which initial pay of more than Rs 15000. Therefore the argument of the Government that thy want to encourage pension society by taxing EPF withdrawal is hollow. Also: Government and Economists wants EPFO to invest in equities saying it will give more return on investment. EPFO now says, it can give 9% interest and still have surplus in the corpus. Government says “NO”. Reason – Government wants to reduce interest rates on small savings. Therefore Please understand the reasons behind such move.
      Reply
      1. M
        Monish
        Mar 1, 2016 at 12:15 pm
        I have written an article demonstrating the impact of EPF tax on middle cl employees you can find it here... I believe your users will benefit from this information please share it to spread the awareness and help people understand the impact with numbers
        Reply
        1. R
          Ramaj
          Mar 1, 2016 at 11:28 am
          Kejri has started polluting yet again. He never though of Safaiwaala's ry and the dues to DMCbefore increasing the ry of himself and AAP MLAs. Now he is questioning Jetley on EPF that too for higher income groups. Kejriwal thinks that everything comes free to be distributed free. When there is aspiration, bridges are to be built, infrastructure to be developed, these are to be financed and not like the water from Haryana and electricity from elsewhere. You have to spend money to develop the resources. He has not worked anywhere sincerely to understand economics it appears. There are several non performing bureaucrats like him who has to be paid heavily and Pay Commission is waiting. You cannot remove them, they are the necessary evils like him.
          Reply

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