Confusion no more! PPF stays on tax exemption list

Clarifying the position, Revenue Secretary Hasmukh Adhia said 40 percent of the interest accrued on contributions made after that date would be tax exempt.

“Towards this objective, the Government has announced that Forty Percent(40%) of the total corpus withdrawn at the time of retirement will be tax exempt both under recognised Provident Fund and NPS”.

While the withdrawals on your National Pension Scheme (NPS) will now be partly taxfree, the Employees Provident Fund (EPF) will be now be partly taxed, which is bad news for retirees.

The ministry, headed by Arun Jaitley, also said that the new provision will not affect people who earn less than Rs 15,000 per month.

Chartered Accountancy firm Nangia & Co said the current tax structure of National Pension Scheme (NPS) was Exempt- Exempt-Tax, which was at a sharp disadvantage to the other major retirement products such as the Employees Provident Fund (EPF) and the Public Provident Fund (PPF). “They can withdraw their 100 per cent corpus when they retire without any taxes”, Adhia said, adding that the distinction would be made clear in the notification. The tax treatment for public provident fund, an optional savings scheme which was highly popular with investors, has been left untouched.

So far, the PPF and EPF have enjoyed the exempt-exempt-exempt (EEE) status, implying no tax will be levied at the stages of investment, interest payout and withdrawal.

The minister also said that the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases. Mr Jaitley proposed to exempt service tax on construction of affordable houses up to 60 sq metres under any scheme of the Central or state government. Also, he proposed to reduce service tax on single premium annuity (insurance) policies from 3.5 per cent to 1.4 per cent of the premium paid in certain cases.

“For the first-home buyers, I propose to give deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed ’50 lakh”, said Mr Jaitley. For the remaining 60 per cent, we want to encourage you to invest in annuity product. However, your corpus is tax free.

“This is a draconian act and will be a killer blow to the already tax burdened salaried class which pays 30 per cent income tax and 30 per cent taxes in indirect form customs, excise, service tax etc”, the petition said.

However, the Finance Bill 2016 provides that there would be monetary ceiling of Rs1.