New Delhi, Feb 29: The changes announced by Union Finance Minister in Budget 2016 can affect one's retirement savings significantly at the time of withdrawal for the Employment Provident Fund (EPF) and National Pension Scheme (NPS) withdrawals on retirement has been made partially taxable.
Till now, the EPF saw an exempt taxation structure, which means there is no tax on investment or on the interest accrued and withdrawal. In case of NPS, however, the funds that one received in one's bank account is taxable.
"In case of superannuation funds and recognised provident funds, including EPF, the same norm of 40 per cent of corpus to be tax free will apply in respect of corpus created out of contributions made on or from April 1, 2016," Jaitley said in his Budget speech.
This essentially means when one withdraws from the EPF, the 60 per cent of the corpus, accumulated after April 1 this year will attract tax. According to the NPS's current provisions, out of the total corpus, the person needs to buy an annuity plan with 40 per cent. Of the remaining money that he/she gets in the bank account, 60 per cent is taxable.