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EPF tax on withdrawal: Here’s how much you will pay according to Budget 2016

Thu March 03 2016, 7:11 am
  • EPF tax on withdrawal: After Arun Jaitley Budget 2016 sparked a furious reaction across India, especially in the middle class, for imposing an EPF tax at the withdrawal stage a lot of sound and fury has been generated but very little light has been shed about how much will income taxpayers finally end up paying. Is the amount humongous, or is it tiny. Or somewhere in between? How badly will it affect a taxpayer's life after retirment? In short, what will they end up paying on EPF tax on withdrawal? Here is all you want to know about what you will pay courtesy Arun Jaitley Budget 2016 EPF tax blow: (Image Source: Thinkstock)

  • EPF tax on withdrawal: FM Arun Jaitley in Buget 2016 may have done what no one would have thought possible, but now that it has been done, the next step is to figure from there. The PM Narendra Modi government has specifically said that the contributions made until March 31, 2016 will attract no tax at the time of withdrawal. It will be only applicable on contributions made on or after April 1, 2016. Since 60% of the future contributions and interest earnings on them will be taxed at the time of withdrawal, it will impact investors who plan to pull the entire corpus at the time of retirement. However, it will not impact those who plan to buy an annuity product out of the 60 per cent of the corpus (from an insurance company), for getting regular pension after retirement.

  • EPF tax on withdrawal: The PM Narendra Modi led NDA government says it will bring parity among provident fund, pension funds and the National Pension System (NPS). Experts say that this will allow investors to choose a product based on the returns they generate and the risk exposure they carry, and not on the basis of the tax benefit they offer. (Image Source: Thinkstock)

  • EPF tax on withdrawal: Some experts say that the government’s move will make the National Pension Scheme (NPS) more popular among investors, as it allows investments to be routed to equity markets that have the potential to generate higher returns. Since the money can be routed to equity markets, it will free up the capital, and can be used in the growth of the economy. (Image Source: Thinkstock)

  • EPF tax on withdrawal: Another argument put forward by the government is that the move will force employees to place the 60 per cent of the corpus in annuity for getting a regular pension. In case the employee puts 60 per cent of the corpus in annuity, the entire corpus becomes tax free. (Image Source: Thinkstock)

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