The Union Government has decided to withdraw its proposal to tax Employees Provident Fund (EPF) withdrawals above 40 percent of the accumulated corpus. The opposition parties claimed credit for compelling finance minister Arun Jaitley to do a rethink.
The move is likely to benefit nearly 45 lakh members of the employees' provident fund (EPF) scheme earning more than Rs.15,000 per month. The 3.26 crore remaining members of the scheme earning less than Rs.15,000 per month had not been targeted by Jaitley's original proposal.
Jaitley had said 40 percent of the corpus withdrawn at the time of retirement was to be tax exempt, expecting employees of private firms to place the remaining 60 percent on annuity to get regular pension. However, if that was not done, then 60 percent of withdrawn corpus was to be taxed.
Jaitley said "In view of the representations received, the government would like to do a comprehensive review of this proposal," and, therefore, I withdraw the proposal in paragraph 138 and 139 of my budget speech."
The finance minister further added that in case of recognized provident funds and superannuation 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 after April 1, 2016.