Revenue Secretary Hasmukh Adhia said the Budget proposal to tax 60 percent of employee provident fund (EPF) withdrawal will affect less than one-fifth of employees with high salaries.

The proposal, he said, is to tax the interest accrued on PF contributions made after April 1, 2016. "The principal amount will not be taxed and will continue to remain tax exempt on withdrawal. What we have said is 40 percent of the interest accrued on contributions made after April 1 will be tax exempt and its remaining 60 percent will be taxed," he added.

This 60 percent will also be tax exempt if it is invested in a pension annuity schemes, he said. "This is not a revenue mobilisation exercise," the Secretary added.

Adhia said that no part of PPF will be taxed and the present scheme of investment up to Rs 1.5 lakh in a year will continue to be tax exempt. PPF on withdrawal will continue to be out of the tax ambit.

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