March 3, 2016

EPF Tax: a 25-year-old could lose 18% of retirement income

The tax levied on the Employee Provident Fund (EPF) is expected to cost almost 18% of a person's entire retirement savings at the date of maturity for a person who starts his career today, a leading daily has reported. Those somewhere in the middle of their career may face losing between Rs 10 lakh to Rs 20 lakh, which is nearly 12% to 8% of the entire corpus, the report calculated.

To calculate the impact of this, the report has assumed that a 25-year-old working individual with a basic pay of Rs 10,000 per month and a provident fund contribution of Rs 2,400 may end up accruing about Rs 1.87 crore at retirement (assumed at age 58 years). Given that he has just started his career, his contribution to the EPF account may begin after April 1, which means his entire corpus will be taken into account for taxation upon withdrawal. At 60% of the corpus amount, the person may end up losing about 18% of his lifetime savings, the report says.

Source: http://www.dnaindia.com/money/report-here-s-how-tax-on-epf-could-eat-into-18-of-a-25-year-old-s-retirement-savings-2184704

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