Use this Excel EPF calculator to understand the Budget 2016 tax implications on your EPF corpus.
As per yesterday's Clarification about Changes made in the Tax Treatment for Recognised Provident Fund & National Pension System (NPS)60% of the entire corpus (not just interest) due to contributions made on or after 1st April 2016 will be taxed upon withdrawal.
The EPF calculator however, provides an option to calculate the amount lost due to tax (effective tax rate ETR) and the effective internal rate of return (IRR) for two options:
- 60% of only the interest due to contributions made on or after 1st April 2016 will be taxed upon withdrawal.
- 60% of the entire corpus (not just interest) due to contributions made on or after 1st April 2016 will be taxed upon withdrawal.
The corpus as on March 31st 2016 and the interest it accumulates until withdrawal is free from tax.
The calculation is up to age 58 as it is not clear how the recently announced withdrawal rules will be married with taxation rules.
Employer contributions have a ceiling of Rs. 1.5 Lakh a year.
Here are the screenshots. Examples were posted earlier today: Budget 2016: Don’t worry -Tax on EPF is quite small!
1. Use this calculator to calmly assess the tax impact. The impact is quite low and I think it is nothing much to worry about.
2. I have made every effort to ensure that there are no errors. However, I could be wrong in my understanding. Do try and trace the formulae used to check with your own understanding. Leave a comment if you notice any issues.
3. Do not come into any conclusions based on what you read here or anywhere else. Stick to your asset allocation and invest as usual. Budget 2016: What should we do now?
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