PF taxation issue: No tax if 60% of corpus invested in annuity

Zee Media Bureau

New Delhi: Seeking to dispel fears of the salaried class, the government on Tuesday clarified that the private employees can place 60 percent of investment under annuity for which they will be exempted from tax.

However, government said that it will consider just making interest component taxable.

The announcement comes a day after Finance Minister Arun Jaitley's proposal to impose a tax on 60 percent of Employee Provident Fund (EPF) corpus, that has not gone down well with the salaried class.

Jaitley announced that withdrawal of EPF and superannuation corpus will now be taxable by proposing to tax part of Employee Provident Fund (EPF) withdrawals from April 1, 2016.

He announced that withdrawals over 60 percent of EPF will be eligible for tax while the remaining 40 percent will be tax free.

Govt had issued clarification about changes made in the tax treatment for recognized provident fund and national pension system (NPS).

Main category of people for whom EPF scheme was created are members of EPFO who are within statutory wage limit of Rs 15,000 per month, the government said.

What we are saying is that such employee can withdraw without tax liability provided he contributes 60 percent in annuity product.

There are no monetary ceilings on employer contribution under EPF, only ceiling being that it would be 12% of salary of employee member, government further clarified.

We issued a press note about how we will bring change in EPFO & NPS and how tax will be levied on them, MoS Finance Jayant Sinha said.