Faced with criticism from all quarters, the government today issued clarifications on the impact of the proposal to tax 60% of your pension corpus. Here’s everything you need to know about the impact of this tax on your pension fund.
Faced with huge uproar over the proposed tax on 60% withdrawal of your EPF, NPS and other pension funds, the government today issued a clarification and a minor roll back of the proposal.
India saw huge uproar after FM proposed to tax 60% of EPF and NPS(Representative Image)
But are you still confused and lost in jargon? Here’s a quick guide to the tax impact on your investments:
What is this tax: This is tax under section 10 of the Income Tax Act.
As it stands now: With the clarification only interest accrued on 60% of pension funds will be taxed during withdrawal.
ETE: Your EPF and NPS now comes under ETE. It means that the investments made into the scheme are tax free. The interest on 60% of your accumulated money is taxable. However, your corpus is tax free.
Tax is prospective: This tax is applicable only from April 1, 2016. And on deposits made after April 1, 2016.
Employee Provident Fund & National Pension Scheme: Interest accrued on 60% of the corpus will be taxed during withdrawal. But the tax is applicable only on deposits made after April 1, 2016.
Other government approved pension funds: Your investments in government approves pension funds will also come under the new measure.
Employer managed pension funds: This will also come under the new tax.
Superannuation funds managed by employers: This will be subject to the new tax.
PPF: Public Provident Fund and other small savings schemes remain tax free.