New Delhi: Reacting to the sharp reaction from the salaried class, the government will reduce the burden of tax owed on provident fund claims at the time of retirement.
Only interest earned on accruals to the Employees’ Provident Fund (EPF) corpus after 1 April will be taxed. Earlier even the principal component, 60% of the accumulated corpus, was to be taxed.
The government is expected to issue a formal statement on this later in the day, said a government official, who did not want to be identified.
At present, withdrawal from EPF is entirely tax-free.
“In order to bring greater parity in tax treatment of different types of pension plans, it is proposed to amend section 10 so as to provide that in respect of the contributions made on or after the 1st of April, 2016 by an employee participating in a recognised provident fund and superannuation fund, up to 40 % of the accumulated balance attributable to such contributions on withdrawal shall be exempt from tax,” the memorandum to the budget documents had said.
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