After a taxing week, Employee Provident Fund tax free again

Tuesday announced a rollback of his budget proposal to tax 60 per cent of the employee provident fund (EPF) corpus at the time of withdrawal and said that the government would do a “comprehensive review” of the proposal. This comes on the back of attacks from contributors, MPs and employee unions, including the BJP’s own trade union wing, the Bharatiya Mazdoor Sangh.

Making a suo motu statement in Lok Sabha, Jaitley also announced a rollback on the proposal that imposed a tax on the employer’s contribution of over Rs 1.5 lakh.

“In view of the representations received, the government would like to do a comprehensive review of this proposal and, therefore, I withdraw the proposals made in para 138 and 139 of my budget speech. The proposal of 40 per cent exemption given to NPS subscribers at the time of withdrawal remains,” he said.

Para 138 of Jaitley’s budget speech said: “In case of superannuation funds and recognised provident funds, including EPF, the same norm of 40 per cent of corpus to be tax free will apply in respect of corpus created out of contributions made after 1.4.2016.” Para 139 said: “Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases. Also, we are proposing a monetary limit for contribution of employer in recognised provident and superannuation fund of Rs 1.5 lakh per annum for taking tax benefit.”