New Delhi: The finance ministry said the purpose of “this reform of making the change in tax regime is to encourage more numbers of private sector employees to go for pension security after retirement instead of withdrawing the entire money from the provident fund account”.
A statement read: “Towards this objective, the government has announced that 40 per cent of the total corpus withdrawn at the time of retirement will be tax exempt both under the recognised provident fund and under NPS.”
The ministry said it was expected employees of private companies would place the remaining 60 per cent of the corpus in annuity, out of which they can get a regular pension.
“When this 60 per cent of the remaining corpus is invested in annuity, no tax is chargeable. So what it means is that the entire corpus will be tax-free, if invested in annuity,” it said.
The finance ministry claimed the main category of people for whom the EPF scheme was created were members of EPFO, who are within the statutory wage limit of Rs 15,000 per month.
“Out of around 3.7 crores contributing members of EPFO as on today, around 3 crore subscribers are in this category. For this category of people, there is not going to be any change in the new dispensation.”
