Zee Media Bureau
New Delhi: Seeking to dispel fears of the salaried class, the government on Tuesday clarified that Public Provident Fund (PPF) will not be taxed on withdrawal and only the interest accrued on contributions to employee provident fund made after April 1 will be taxed while the principal will continue to remain tax exempt.
"The principal amount will not be taxed and will continue to remain tax exempt on withdrawal. What we have said is 40 percent of the interest accrued on contributions made after April 1 will be tax exempt and its remaining 60 percent will be taxed," Revenue Secretary Hasmukh Adhia said.
Small salaried employees with up to Rs 15,000/month income will be kept out of purview of proposed taxation of EPF, Adhia further said.
Notably, Budget 2016, announced by Finance Minister Arun Jaitley on Monday proposes to tax part of Employee Provident Fund (EPF) withdrawals from April 1, 2016.
Those withdrawals over 60 percent of EPF will be eligible for tax while the remaining 40 percent will be tax free.
"In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40 percent of corpus to be tax free will apply in respect of corpus created out of contributions made on or from 1.4.2016," said Finance Minister Arun Jaitley in his budget speech.
The tax will be imposed on EPF corpus withdrawal exceeding Rs 1.5 lakh each.
So far EFP withdrawal have been free from tax exemptions in last five years.