New Delhi: The Budget prescribing a Rs 7.5 lakh per annum cumulative upper ceiling for tax-free contribution by employers under employee provident fund (EPF), National Pension System (NPS) and superannuation fund will impact only those with an annual salary of more than Rs 60 lakh, Revenue Secretary Ajay Bhushan Pandey said Monday.
The proposal is not something unique to India as similar ones are followed in other countries as well, he said.
Pandey further said taxing dividend income at the hands of the receiver is "most fair" rather than charging a dividend distribution tax (DDT) on the companies paying dividend because the rate of tax levied is then decided on the basis of the total income of the recipient.
Speaking about the Budget provision that proposed a combined upper limit on tax-free employers' contribution towards the NPS, superannuation fund and provident fund at Rs 7.5 lakh annually for an employee, Pandey said if there is no limit, it will allow structuring of the salary into various components to lower the tax outgo.
"If you consider the Rs 7.5 lakh (threshold), it will affect only those with an annual salary of more than Rs 60 lakh," Pandey said at a post-Budget interaction organised by Ficci.
"Having no limit also allows structuring of the salary into various components where this particular thing could be hiked up and then actual tax could be very less. This threshold is not something very very unusual we have done. It is being developed in many parts of the world," he added.
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