Withdrawal of new PF corpus made after April 2016 will be taxable
Withdrawal of new PF corpus made after April 2016 will be taxable
In bad news for those who were investing in PPF and EPF for their retirement, finance minister Arun Jaitley on Friday proposed to tax its returns on maturity.
Now 60 per cent of the corpus of PPF and EPF created out of contributions made after April 1 will be taxable. However, those who are investing in new pension scheme (NPS) withdrawal up to 40 per cent of the corpus at the time of retirement will be tax exempt.
The aim is to give similar tax treatment to all pension schemes.
“Pension schemes offer financial protection to senior citizens. I believe that the tax treatment should be uniform for defined benefit and defined contribution pension plans,” said Mr Jaitley while presenting the Union Budget.
Economic Survey 2015-16 had said that most of the tax benefits of the PPF are enjoyed by the super-rich, which it had pegged at Rs 11,900 crore.
“I propose to make withdrawal up to 40 per cent of the corpus at the time of retirement tax exempt in the case of National Pension Scheme,” he said.
“In case of superannuation funds and recognised provident funds, including EPF, the same norm of 40 per cent of corpus to be tax free will apply in respect of corpus created out of contributions made after April 1, 2016,” said Mr Jaitley.
However, the tax on withdrawal, experts say, will apply only on the corpus created through contributions made after April 1, 2016. This rule will not apply for corpus created before March 31, 2016.
Revenue secretary Hasmukh Adhia clarified that there would be no tax on the remaining 60 per cent if it is invested in annuity (pension) products for earning regular income.
Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all these three cases. “Also, we are proposing a monetary limit for contribution of employer in recognised provident and superannuation fund of Rs 1.5 lakh per annum for taking tax benefit,” said Mr Jaitley.
He proposed to exempt from service tax the annuity services provided by the National Pension System (NPS) and services provided by EPFO to employees.
“I also propose 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,” said the finance minister.
Rs 50,000 extra tax relief on home loans For first-time home buyers, Union finance minister Arun Jaitley on Friday proposed an additional Rs 50,000 deduction on interest on loans. At present, Rs 2,00,000 deduction is allowed for interest paid on home loans.
“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.
Real estate sector, particularly housing segment is facing a huge slowdown for the last 2-3 years, resulting in a huge delay in delivery of projects to customers and piling up of unsold inventories.
In order to fuel activity in the housing sector, Mr Jaitley proposed to give 100 per cent deduction for profits to an undertaking from a housing project for flats up to 30 square metres in four metro cities and 60 square metres in other cities, approved during June 2016 to March 2019. MAT will apply to these undertakings. 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.
