The Finance Minister, in the Parliament today, announced roll-back of the budget proposal to tax contribution made into and withdrawal from Recognised Provident Fund (‘RPF’).
The Government has withdrawn following budget proposal:
1. It was proposed to consider employer’s contribution to RPF in excess of INR 150,000 per annum as taxable in the hands of employees. The said proposal has now been withdrawn and employer’s contribution to RPF remains non-taxable in the hands of employees up to 12% of salary.
2. It was proposed that 40% of lump-sum withdrawal of accumulated balance attributable to contributions made to RPF on or after 1 April 2016 by an employee will be tax free – balance will be taxable. The said proposal has now been withdrawn and withdrawal of accumulated balance from RPF remains non-taxable in the hands of employees – where such withdrawal is made after rendering continuous service for 5 years or more or under other specified events (as was applicable earlier).
This roll-back will ensure that the RPF continues to be covered under the EEE (Exempt-Exempt-Exempt) regime of taxation.
The following proposal in relation to Superannuation Fund has also been withdrawn:
a) Proposal to tax portion of lump-sum withdrawal from Superannuation Fund; b) Proposal to increase the exemption limit for employer’s contribution to Superannuation Fund from INR 100,000 to INR 150,000 per annum.
However, the proposal to consider 40% of National Pension System (‘NPS’) withdrawal as exempt from tax has been retained.