Government today made it clear that Public Provident Fund will not be taxed on withdrawal. Revenue Secretary Hasmukh Adhia said in a statement that only the interest that accrues on contributions to Employee Provident Fund made after 1st of April this year will be taxed while principal will continue to remain tax exempt.

Mr Adhia elaborated that 40 percent of the interest accrued on contributions made after 1st April will be tax exempted and remaining 60 percent will be taxed. The Revenue Secretary also clarified that this is not a revenue mobilisation exercise and this 60 percent will also be tax exempted if it is invested in a pension annuity scheme. 

He said the Budget proposal to tax 60 per cent tax withdrawal will affect less than one fifth of employees with high salaries. He said small salaried employees with income up to 15,000 rupees per month will be kept out of purview of proposed taxation of EPF. 

The Revenue Secretary said National Pension System has been made tax friendly. He said 40 percent of the corpus that an investor can withdraw on maturity will be made tax free.