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EPF tax in Budget 2016: 5 quotes by top babus on controversy

Wed March 02 2016, 1:27 pm
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    In the wake of the controversy breaking out over imposition of PF withdrawal tax and EPF withdrawal tax by FM Arun Jaitley in Budget 2016, the government rushed out a high level official to clear the situation and its stand in the wake of unions threatening strike and people panning the social media. The Budget 2016-17 proposed to tax interest on 60 per cent of EPF withdrawal. Here are the top 5 quotes: (Express photo by Prem Nath Pandey)

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    1. 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. "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. (Express photo by Prem Nath Pandey)

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    3. "There are about 3 crore people whose monthly income is less than Rs 15,000. They are called eligible members of EPF. For this 3 crore people, there is going to be no change in status of taxation. They can withdraw their 100 per cent corpus when they retire without any taxes," Adhia said, adding that the distinction would be made clear in the notification. (AP)

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    4. "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. "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. (PTI)

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    5. PF Withdrawal 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. So if your corpus is Rs 1 crore, Rs 40 lakh you withdraw and use it for house construction or other work... Rs 60 lakh you invest in annuity so that you keep getting pension," he said. (PTI)

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