Additions over ₹2.5 lakh a year to be taxed.
The Union Budget has proposed taxing the income on provident fund contributions of over ₹2.5 lakh a year, usually made on a voluntary basis by employees.
A similar tax exemption offered to investors in unit-linked insurance products has also been capped to ensure that maturity benefits accruing from premium payments over ₹2.5 lakh a year, will be subjected to capital gains tax.
For contributions upto ₹2.5 lakh a year into Employees’ Provident Fund, tax exemptions will remain along with guaranteed returns, Finance Minister Nirmala Sitharaman said.
“However, some people go to the extent of contributing ₹1 crore each month… what would be his salary? For him to get both tax concession and an assured income, is not comparable with an employee who earns ₹2 lakh and gets 8% return,” the minister said.