Drawing flak from all quarters and a strong backlash from the salaried middle class, union government has announced that only interest on the of EPF contributions will attract tax at the time of withdrawal. Revenue Secretary Hasmukh Aadhia clarified in an interview that “Personal Provident Fund (PPF) will not be taxed on withdrawal and only the interest that accrues on contributions to employee provident fund (EPF) made after April 1 will be taxed, while principal will continue to be tax exempt”.
Dealing a big blow to over six crore salaried class, Finance Minister Arun Jaitley had announced that as much as 60% of Employee Provident Fund would be subject to tax, including on the principal. The move was met with dismay across the employees , for many of whom the EPF is often the lone tax-saving financial tool. The Finance Minister had made only 40% of the withdrawal tax-free at both entry and exit stages.
Hasmukh Adhia said the Budget proposal to tax 60 per cent of EPF withdrawal will affect less than one-fifth of employees with high salaries.