New Delhi: Seeking to dispel fears of the salaried class, the government today clarified the popular public provident fund (PPF) scheme will continue to stay out of the tax ambit and that tax will be levied only on accrued interest on 60 percent of employee provident fund (EPF) contribution.
In an interview to PTI, Revenue Secretary Hasmukh Adhia said that only the interest accrued on 60 percent contribution to Employee Provident Fund (EPF) after April 1, 2016 will be taxed while the principal amount will continue to remain exempted from tax.
He further said,"withdrawal will affect less than one-fifth of employees with high salaries."
The proposal, he said, is to tax the interest accrued on PF contributions made after April 1, 2016.
“The principal amount will not be taxed and will continue to remain tax exempt on withdrawal. What we have said is 40 per cent of the interest accrued on contributions made after April 1 will be tax exempt and its remaining 60 per cent will be taxed.”
This 60 per cent will also be tax exempt if it is invested in a pension annuity schemes, he said. “This is not a revenue mobilisation exercise,” he added.
Adhia said that no part of PPF will be taxed and the present scheme of investment up to Rs 1.5 lakh in a year will continue to be tax exempt. PPF on withdrawal will continue to be out of the tax ambit.