The Finance Minister has said that the government has implemented a new rule in the EPF to balance between people who have taken advantage of tax exemption by more contribution and general contributor.
The government can withdraw the rule of taxing interest on the contribution of more than 2.5 lakh rupees in EPF. The government has indicated to review this rule. In an interview to English newspaper ‘The Hindu Businessline’, Finance Minister Nirmala Sitharaman said that the government is ready to review this rule.
In the general budget, the government had introduced a tax rule on contributions above 2.5 lakhs to discourage taxpayers from accumulating more money in EPF on behalf of higher earners. It is important to note that in EPF, there is no tax on the interest received on contribution. Now income on contribution of more than two and a half lakh rupees has been taxed.
Government ready to review the rule
In an interview given to ‘The Hindu Businessline’, Sitharaman said that the government is always ready to review the rule of depositing more than Rs 2.5 lakh. But it has to be understood that under this rule we wanted to bring such people in the tax range who wanted to take advantage of tax exemption by depositing more money in EPF than average Indians.
People used to get contribution in EPF to save tax
In fact till now, people with higher wages used to increase the amount deposited in their EPF to increase tax free income. The government had made a similar proposal in the budget of 2016. According to that proposal, interest earned on 60 per cent of EPF was brought under the tax net. After the people opposed this proposal, the government withdrew its steps on it.
Finance Minister said, no intention to merge EPF into NPS
Sitharaman said that the EPF will continue in its present form. He also said that the government has no intention of merging the National Pension Scheme i.e. NPS with the EPF. He believes that the contribution to EPF is simple for middle income people.
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