01 Mar, 2016 8:54p.m.

Govt. to consider demands for rollback of tax on EPF withdrawals

Under all-round attack, the government on Tuesday promised to consider demands for a partial rollback of the proposal to tax 60 per cent of withdrawals from provident fund and a ceiling on employers contribution but made it clear that PPF will continue to be tax exempt.

Earlier in the day, Revenue Secretary Hashmukh Adhia said only 60 per cent of interest on contributions made after April 1, 2016 will be taxed and that the principal amount of contribution will remain untouched at the time of withdrawal.

However, in the evening a government press note said a proposal to tax only interest and not principal is under consideration.

After that Adhia also said there was a demand being made to this effect and it would be taken into consideration.

The press note said that the new tax proposal was aimed at taxing only the high salaried individuals totalling about 70 lakh people out of the 3.7 crore employee provident fund (EPF) members. About 3 crore individuals come under the statutory wage limit of Rs 15,000 per month so will not be affected by the proposed changes.

Finance Minister Arun Jaitley in his Budget for 2016-17 yesterday had proposed that 60 per cent of the withdrawal on contribution to employee PF made after April 1 this year will be subject to tax. This would apply to superannuation funds and recognised provident funds including EPF.

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