Salaried individuals may have reason to feel outraged by the Narendra Modi government's decision to tax 60 per cent of provident fund withdrawals at the time of retirement, breaking with a convention that granted tax-free status on superannuation benefits.

Contributions made on or after April 1, 2016, by an employee in a recognised provident fund, including the Employees' Provident Fund (EPF), and any superannuation fund will fall within the ambit of the new tax.

Effectively, 40 per cent of the accumulated balance attributable to such contributions will be exempt from tax on withdrawal.

The remaining 60 per cent will become taxable at the taxpayers' relevant marginal rate, unless the money is invested in annuities (schemes that yield annual returns for several years) or the subscriber dies, in which case the heirs get tax-free cash.

The budget said a category called "excluded" employees would be exempt from the withdrawal tax. But this category is yet to be defined.

The tax shocker in this budget - through an amendment to Section 10 (12) of the Income Tax Act - ostensibly seeks to bring about "greater parity in tax treatment among different types of pension plans".

The tax change on EPF withdrawals follows a change in the tax treatment proposed under Section 10 (12A) that grants a similar tax exemption of up to 40 per cent on the amount payable to an individual who opts to close his account with the National Pension System Trust at the time of retirement.

In the absence of a social security scheme in the country, the new tax will deliver a body blow to an army of new retirees.

Revenue secretary Hasmukh Adhia told a news conference in Delhi that the amount would not be taxed if the amount was immediately parked in annuities, which offer lowball returns.

"However, the whole amount received by the nominee, on death of the assessee shall be exempt from tax," the government said in the explanatory memorandum to the Finance Bill 2016.

Under Section 17, employers' contribution to an employee's registered PF account exceeding Rs 1 lakh is charged to tax as a perquisite. This threshold is now being raised to Rs 1.5 lakh.

The Finance Bill provides for a situation where a PF subscriber may be able to escape the tax on withdrawals if he is an "excluded employee" - a term that has not been clearly defined in the bill.

"The term 'excluded employee' means an employee whose monthly salary does not exceed such amount as may be prescribed," the Finance Bill said, indicating that the government will decide on this limit soon.

The finance minister did not raise the income tax slabs in this budget. However, individuals with total income exceeding Rs 1 crore will have to pay surcharge at 15 per cent, up from 12 per cent at present.

Assessees who do not get any house rent allowance and are paying rent in excess of 10 per cent of their income are at present entitled to claim deduction up to Rs 2,000 per month. The outer limit for such deduction under Section 80GG has been enhanced to Rs 5,000 per month from the financial year 2016-17.

The interest payable on a loan that an individual takes from any financial institution for acquiring a residential flat or property shall be allowed for deduction to the extent of Rs 50,000 under the newly substituted Section 80EE if the loan is taken in the financial year 2016-17, the cost of the house does not exceed Rs 50 lakh and the amount of loan does not exceed Rs 35 lakh. Such a person should not own any residential property on the date of the sanction of loan.

The rate of tax deduction at source (TDS) on payment of insurance agents' commission has been reduced from 10 per cent at present to 5 per cent. Payment made by the LIC in certain cases is subject to TDS. The rate of TDS on such payment has been reduced from 2 per cent to 1 per cent. The new rates will apply from June 1 this year.

The threshold limits for deduction of various payments have also been revised. For example, TDS will have to be deducted if insurance commission or any other commission exceeds Rs 15,000. Likewise, payment to contractors will be liable to TDS if annual payment exceeds Rs 1 lakh.

The finance minister has introduced "the income declaration scheme, 2016", a project for black money disclosure which will be operative from June 1. The undisclosed income of any financial year up to 2015-16 may be disclosed and the tax (30 per cent), a surcharge named Krishi Kalyan (25 per cent of tax) and a penalty (25 per cent of tax) shall be payable, aggregating to 45 per cent.

Those availing themselves of the scheme will not be subjected to any inquiry or scrutiny and they will also be exempt from wealth tax. They will also be granted immunity from the Benami Transaction Prohibition Act, 1988. The last voluntary disclosure scheme was offered in 1997. The new scheme is expected to get a good response.