Confusion continues on EPF taxation
View(s):No clear guidelines or circular has been issued so far on imposing a 14 per cent tax on Employees Provident Fund (EPF) income and 14 per cent tax when members receive dividends, informed sources revealed. The Central Bank has sent a letter to the Treasury seeking clarity on the matter but no action has been taken to rectify the issue affecting the interest rate of EPF money of private sector employees. The interest rate of EPF benefits of around 2.6 million employees will come down to 9 per cent from 10.5 per cent at present under these circumstances.
The 14 per cent tax was proposed in the 2017 budget and included in the Inland Revenue Act, but the then Labour Minister W.D.J. Seneviratne and Former Finance Minister Ravi Karunanayake had given an assurance to trade unions that they will withdraw the tax. However Inland Revenue (IRD) has not been given any directive to exempt EPF from the 28 per cent tax, IRD sources confirmed.
The 10 per cent tax levied on the EPF has been raised to 14 per cent and 5 per cent withholding tax is also applicable when members receive dividends, official sources said.