Reduction of Interest Rates on Public Provident Fund

Reduction of Interest Rates on Public Provident Fund

Interest Rates on various Small Savings Schemes for the 1st Quarter of 2016-17 notified;. Additional Interest Rate spreads which the Government allows on Small Savings Schemes like PPF, Senior Citizen Savings Scheme, Sukanya Samridhi Scheme and NSC etc. are being continued and included in the rates notified today.

From the year 2012-13, the interest rates on various Small Savings Schemes (SSS) are recalculated and notified in the month of March every year. These rates are applicable for the next financial year. This is being done in line with the recommendations of the Shyamala Gopinath Committee to ensure that the interest rates of Small Savings Schemes are market linked.

Accordingly, as done in the previous years, the interest rates for various Small Savings Schemes were due for recalculation in March 2016. As notified on 16th February, 2016, instead of annual resetting of interest rates for the next financial year, the interest rates from now on will be reset every quarter based on the G-Sec yields of the previous three months. Consequently, the interest rates for various Small Savings Schemes were recalculated with reference to the G-Sec yields of equivalent maturity for the months December 2015 to February 2016. Based on this calculation, the interest rates on various Small Savings Schemes for the 1st quarter of 2016-17 have been notified today. The rates of interest on various small savings schemes for the First Quarter of Financial Year 2016-17, on the basis of the interest compounding/payment built-in in the schemes, shall be as under:

This is a formula driven process.

Further, as notified earlier, the additional interest rate spreads which the Government allows on Small Savings Schemes like PPF, Senior Citizen Savings Scheme, Sukanya Samridhi Scheme, NSC etc. are being continued. The additional spread for these Schemes are 25 basis points for PPF, 100 basis points for Senior Citizen Savings Scheme, 75 basis points for Sukanya Samridhi Scheme, 25 basis points for five year time deposit, 25 basis points for National Savings Certificate and 25 basis points for Monthly Income Scheme. These additional interest rate spreads are being continued and are included in the rates notified today.

The quarterly revision of interest rates will ensure that the interest rates under Small Savings Schemes are more dynamically related to the current market rates, thereby enabling the Banks to move their interest rates in line with current money market rates.

Source: PIB News

Tax on Provident Fund withdrawn

Tax on Provident Fund withdrawn

The Centre has withdrawn its proposal to impose tax on Employee Provident Fund (EPF) withdrawals.

From the very beginning, Central Government Employees unions all over the country have been opposing the government’s decision to impose tax on the money that they had been saving during their entire careers. After the Union Budget, the Central Government workers unions vehemently opposed the plan.

On February 29,  Arun Jaitley, the Finance Minister, presented the Union Budget for 2016-17 in the Parliament. It was announced that tax will be imposed on 60 percent of the EPF. The decision was met with stiff opposition all over the country. The opposition parties demanded that the tax on Provident Fund be withdrawn.

Arun Jaitley informed that decision in this regard will be made during the debates on the Budget. Accordingly, during the Parliamentary debate yesterday, Arun Jaitley voluntarily announced the decision to withdraw the taxes on Provident Fund. He added that tax exemption for Rs.1.5 lakhs will be given for the contribution made for pension funds.

The decision to exempt 40 percent of the PF funds from taxes stays. When the government made the announcement to impose taxes, the opposition parties and trade unions all over the country accused it of imposing new taxes whenever it faced cash crunch.

The government had clarified that the decision to impose tax on PF savings was not meant for increasing the revenue of the government, but to encourage workers to join pension schemes. But, it has now announced that the tax has been withdrawn.

Members of the Parliament have welcomed the government’s decision to withdraw the taxes on PF savings. It has to be mentioned here that Arun Jaitley, in his statement, had said that the taxes will encourage people to save more.

Congress Vice President, Rahul Gandhi said that the government has succumbed to the pressure from the people and has withdrawn the taxes on PF savings.

Centre decides to withdraw tax on Provident Fund

Centre decides to withdraw tax on Provident Fund

News have surfaced that the Prime Minister has instructed the Finance Minister to put a hold on the proposed plan to impose taxes on PF withdrawals. Finance Minister Arun Jaitley is expected to make an official announcement in this regard shortly.

Employee unions all over the country have been vehemently opposing the proposed tax on the withdrawals made on the most important savings of a worker, from the moment the announcement was made. Most employees depend on their provident fund savings to meet some of the most important expenses of their lives, like medical, marriages, building a house, etc. The decision to impose tax on these withdrawals was condemned by all.

Jaitley had announced a tax on 60 percent of the Employee Provident Fund, and Public Provident Fund. The government has now said that they had planned to impose tax only on the PF Interest. But, there was strong opposition for this too. Demands were made to withdraw this tax.

According to information available, Jaitley had informed at the meeting of the MPs that the Prime Minister will have to decide on this. Meanwhile, the Prime Minister has recommended the Finance Minister to stop the tax on the PF withdrawals, and to conduct a thorough study on this. Arun Jaitley is expected to take the required action after consulting with the officials of his ministry. The Prime Minister’s intervention has restored the peace of mind of more than 60 lakh Government employees.

Income Tax for Premature Provident Fund withdrawal of more than Rs.30,000

Premature Provident Fund withdrawal – Income tax will be imposed

Income Tax for Premature Provident Fund withdrawal of more than Rs.30,000

The Government has announced that income tax will be imposed if, at the time of premature withdrawal, the Provident Fund amount is in excess of Rs.30,000.

Finance Minister brought a new provision in his budget that allows for TDS on Provident Fund withdrawal before five years of continuous service. When calculating the period of continuous service of five years, the previous employment can also be included. The intention of this at promoting long-term savings. The amendment will come into force from June 2015.

“Taxes will be imposed if, at the time of closing or transferring the PF account, the amount is in excess of Rs.30,000, and, if the employee has been employed in the current job for less than five years. Tax rebates are applicable. In order to claim tax exemption, the person has to submit a copy of his/her PAN card and Forms 15G and 15H, accompanied by a signed and filled up Form 19.

“Failing to do so will attract maximum taxes of up to 34.61%. If the forms are submitted, only 10% taxes will be deducted. Taxes will not be imposed if an old PF account is being converted to a new PF account. If the employee has served for more than five years, then, at the time of closing his account, no taxes will be imposed.

“The PF amount will also not be taxed if the employee is unwell, if the company has closed down, if the employment contract comes to an end, or if the employee loses employment for reasons that cannot be attributed to him/her.”

Source: CGEN.in