You may now consider investing in pension schemes, say experts

Govt plans to tax just 60% of the corpus withdrawn from pension funds

After the withdrawal of a key proposal on the provident fund scheme with the retention of a plan to tax just 60% of the corpus withdrawn from pension funds, India's social security for the retired has become more attractive, experts said.

"The employees' provident will hence continue to be an attractive investment option with exempt, exempt, exempt scheme," said Tapati Ghose, partner with Deloitte Haskins and Sells, referring to the tax exemptions on contributions, interest thereon and withdrawals.

"The icing on the cake is that the exemption provided for 40% withdrawal from the National Pension Scheme corpus still remains," Ghose said, referring to this scheme now moving from a full tax on withdrwals to 60% taxation.

Finance Minister Arun Jaitley's proposals on the tax treatment of provident fund and pension had evoked sharp criticism, following which he withdrew a part of such plans on Thueady in a suo moto statement to the Lok Sabha.

First he said the proposal to tax 60 percent of provident fund withdrawals after April 1, 2016, if they are not re-invested in annuity funds, was being rolled back. Also withdrawn was his plan to limit employer contributions in such funds to Rs.150,000 per annum to avail tax sops.

"Withdrawal of tax on provident fund withdrawals as stated by the finance minister in parliament today would be welcome relief for the salaried class," said Parizad Sirwalla, partner with KPMG.

The proposal on pension is also the right move towards a pension-based society, Sirwalla added.