October 17, 2026 09:50 am (IST)
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Dissatisfaction over EPF tax may compel government to consider the decision
New Delhi, Mar 1 (IBNS) The central government is likely to consider a partial rollback of the Employee Provident Fund (EPF) tax on fund withdrawals proposed in the Union Budget 2016 by finance minister Arun Jaitley on Monday following wide-spread dissatisfaction expressed by the salaried employees, according to media reports.
In the Budget, it was proposed that after April 1, employees will have to pay income tax on 60 per cent of the amount withdrawn from the EPF. The remaining 40 per cent will be tax free. As of now, employees were not required to pay any tax.
According to the finance minister, the move would bring about parity among the New Pension Scheme and other retirement schemes.
He had also said that small salaried employees with up to Rs 15,000/month income will be kept out of purview of the proposed EPF taxation.
The finance ministry on Tuesday has issued a clarification saying that contributions to the Public Provident Fund (PPF) will continue to remain exempted from tax and there will be no tax on withdrawal. It also clarified that tax will be levied only on accrued interest on 60 percent of EPF contribution, according to media reports.
The tax on EPF withdrawal is expected to affect 6.5 crore salaried people, according to media reports.
While a complete rollback is unlikely, the government is looking at ways to reduce the tax burden and Prime Minister Narendra Modi is expected to take a call on the rollback, reported NDTV on Tuesday quoting sources.
The channel also reported that Revenue Secretary Hasmukh Adhia said on Monday that there will be no tax on 60 per cent of EPF withdrawn if it is invested in annuity (pension) products for earning regular income.
Talking to NDTV, on Monday, Minister Jayant Sinha had said, "If you take out the 60 per cent and want to consume it in one year, you will have to pay tax because effectively you are defeating the purpose of the pension scheme." To which, retorted Congress lawmaker, "People don't take out PF money to put it into an annuity, they take it out because they need it."
On Twitter, #RollBackEPF appears to be one of the top trends on Monday and Tuesday.
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