The Centre today said it would certainly think about needs for a rollback of the proposal to income tax 60 every cent of withdrawals from provident fund and a ceiling on the subject of the supplement by employers.
The Finance Minister will certainly think about representations received on the subject of these 2 proposals and take a decision in due course, the federal government clarified with a statement. Reacting to the furore over the Budget proposal, the Finance Ministry said the relocate was aimed at difficult just the high-salaried people totalling concerning 70 lakh of the 3.7 crore Worker Provident Fund (EPF) members. concerning 3 crore people came under the statutory wage limitation of Rs 15,000 every month and will certainly not be affected, it said.
Also, the statement said there was no adjustment in the existing income tax procedure of the People Provident Fund (PPF).
The Finance Ministry issued the clarification while noting that there appeared to be some “misunderstanding” on the subject of the issue. It said the purpose of making the adjustment in the income tax regime was to motivate a lot more exclusive sector staff members to go in for pension protection after retirement as opposed to withdrawing the entire quantity from the EPF account.
Towards this objective, the federal government has actually announced that 40 every cent of the complete corpus withdrawn at the moment of retirement would certainly be income tax exempt, the two under the recognised Provident Fund and the National Pension Scheme.
“It is expected that the staff members of exclusive business will certainly position the remaining 60 every cent of the corpus in annuity, from which they can easily grab routine pension. Once this 60 every cent of the remaining corpus is invested in annuity, no income tax is chargeable. So just what it indicates is that the entire corpus will certainly be tax-free, if invested in annuity,” it said.
The federal government said the pointer was to motivate people to invest in pension product and services very compared to withdraw and usage the entire corpus after retirement.
“We have actually received representations suggesting that if 60 every cent corpus is not invested in annuity products, income tax need to be levied just on the subject of accumulated returns on the subject of the corpus, and not on the subject of the contributed amount.
“We have actually Additionally received representations asking for not having any kind of financial limitation on the subject of the company supplement under EPF due to the fact that there was no such limitation on the subject of the NPS. The Minister would certainly be interested in these suggestions,” the ministry said.