A proposal from the finance ministry to tax the Employees Provident Fund in some new form came up in a meeting with the Prime Minister’s Office (PMO) but there was no agreement on a threshold over which it should apply.
Buckling under pressure, the government on Tuesday announced in Parliament that the proposal to tax 60 per cent of Employees’ Provident Fund has been withdrawn.
The purpose of this reform of making the change in tax regime is to encourage more number of private sector employees to go for pension security after retirement instead of withdrawing the entire money from the Provident Fund Account.
The changes announced by the finance minister Arun Jaitley in the Budget can reduce your retirement savings significantly when you withdraw it. The FM has made Employee Provident Fund (EFP) and National Pension Scheme (NPS) withdrawals on retirement partially taxable.