Finance Minister Arun Jaitley on Wednesday said the Government would take a final decision on the Budget proposal to tax 60 per cent of Employees Provident Fund (EPF) savings of those earning over Rs. 15,000 a month, before it responded to the issue during the debate on the Finance Bill in Parliament.
“We will respond in Parliament…,” Mr. Jaitley said at a post-Budget interactive session with representatives of trade and industry associations, including the CII, FICCI and the Assocham.
The Finance Ministry issued a clarification on Tuesday that EPF savings will not be taxed at retirement, if the retiring employee opts to use 60 per cent of his EPF account balance to buy an annuity product that provides them a monthly pension. The Budget announced that 40 per cent of the EPF savings will be tax-free at the time of withdrawal on retirement.
Mr. Jaitley said the tax proposal was not aimed at revenue generation, but help everyone get pension.
“The balance 60 per cent [of EPF savings] if converted to annuity and used for a regular pension will not be taxed. The objective is to incentivise people to get pension and disincentivise consumption of savings,” he said at the meeting.
The proposal would only impact high-income private sector employees, he said, ADDING that nearly 3 crore active EPF members receiving monthly salaries of less than Rs. 15,000 would not be affected by the tax.