Government withdraws controversial EPF tax proposal



Finance Minister Arun Jaitley announced in the Lok Sabha on Tuesday (8th March) that government has decided to withdraw the proposal to impose tax on withdrawal from the Employees’ Provident Fund (EPF) contributions.

Finance Minister Arun Jaitley also withdrew the Budget proposal of taxing employer’s contribution to provident and superannuation fund (SAF) beyond Rs 1.5 lakh.

The rollback of the controversial EPF tax proposal is a step in the right direction and will bring welcome relief to the salaried class, say tax experts

With the rollback of these proposals, EPF will continue to be an attractive investment option with an EEE scheme. Exempt in all three stages of EPF – contribution, interest as well as withdrawal.

In addition, the exemption provided for 40% withdrawal from the NPS corpus still remains. The NPS scheme would hence now move from a EET scheme to a partially exempt scheme at the time of withdrawal, making this more attractive.

2 Replies to “Government withdraws controversial EPF tax proposal”

  1. Dear Sir,

    Kindly let me know, whether withdrawal of Superannnuation fund is taxable?

    I was employed with an employer for 4+ yrs who was deducting a % of gross salary as superannuation fund on monthly basis. I withdrew the accumulated amount after resigning from the job. I was paid 1/3rd of the amount as a lumpsum payment and balance I’m receiving on monthly basis from LIC. Hence, I would like to know whether I’m supposed to pay tax for the lumpsum payment & the amount which i receive on the monthly basis??


    Vignesh S

    1. Hi Vignesh,

      Amount withdrawn from the superannuation fund is fully taxable when the employee leaves the organization. it is only exempt if the withdrawal is at the time of retirement, death or incapacitation.

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