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Economy

Update: EPF Will No Longer Be Taxed, Jaitley Withdraws Budget Proposal

Jaitley now withdraws the EPF Proposal, apparently. This was part of his speech in the Parliament today.

Our View 

We had a quick periscope on what we thought: 

We think the EPF Tax is gone for now, but they will review the concept and come back. The review is intended to push people into a pensioned retirement rather than a lumpsum withdrawal and therefore this tax can come back in different ways. The fight isn’t over. The change will however be a relief to people who can’t change their PF contributions because the companies they work in don’t know how to switch the contribution amounts.

The other thing: Even the employer contribution being limited to Rs. 150,000 for non-taxability has been removed. (Para 139 in the speech). So employers can put any amount (limited to 12% of basic salary) and that will remain non taxable, apparently. 

The battle has been won, for today. But in the long term we should expect that if it’s not taxed going in, it will be taxed at exit. But at least this year, EPF remains “EEE”, like PPF, ELSS and PPF. 

  • Paddy says:

    The battle has only been won for today!… This means nothing – except that EPF may remain EEE in 2016-2017 or at max till Modi – Part 1. comes to an end. This “IS” going to be taxed in some shape or form in the future
    The best part about this whole episode is: “WE” the people now know that EPF is not sacrosanct and some of these instruments could be tweaked by the govt. Its a rude awakening – but a necessary one. The prior generation was caught off guard in the UTI issue (remember my grandmother loosing substantial portions of her savings), at least our generation has some time to bide re: EPF!… – Thats at least how I look at this.