Income Tax on EPF withdrawn – FM says in Parliament
Income Tax on EPF withdrawn – FM says in Parliament – “We propose to withdraw the tax… the tax proposal for NPS scheme has been retained,” Finance Minister Arun Jaitley said in Lok Sabha on Tuesday.
Buckling under pressure, the government on Tuesday announced in Parliament that the proposal to tax 60 per cent of Employees’ Provident Fund has been withdrawn.
“We propose to withdraw the tax… the tax proposal for NPS scheme has been retained,” Finance Minister Arun Jaitley said in Lok Sabha on Tuesday, adding that “the intention was to encourage a pensioned society”.
In his budget proposal, Jaitley had proposed that 40 per cent of the EPF withdrawals would be tax exempt and the remaining 60 per cent would also get the same treatment provided the amount is invested in pension annuity schemes.
This proposal was criticised by the parties and the unions which said it amounted to forcing employees to invest in pension annuity schemes.
“Employees should have the choice of where to invest. Theoretically such freedom is desirable, but it is important the government to achieve policy objective by instrumentality of taxation. In the present form, the policy objective is not to get more revenue but to encourage people to join the pension scheme,” Jaitley said explaining the rationale for the taxation proposal.
The proposal would not have impacted 3.26 crore EPFO subscribers drawing statutory wage of upto Rs 15,000 per month. Employees Provident Fund Organisation (EPFO) has a total subscriber base of 3.7 crore.
Several Unions threatened to stage a protest against the government on Thursday seeking immediate reversal of the Centre’s proposal.
“The move to tax EPF will be a terrible blow to six crore employees covered under the EPF Act… The BJP-led central government is playing with their future. The proposal must be rolled back immediately,” Delhi Congress chief Ajay Maken had said at the protest at Jantar Mantar.
Maken said, according to the budget proposal, an employee will have to invest 60 per cent of the PF in annuity “as per wishes of government” if he does not want to pay tax on the amount he receives at the time of retirement.
He claimed the move was aimed at helping insurance companies, particularly private ones.
“Salaried people depend on their salaries for their living and on retirement they depend on their EPF savings for their daughter’s marriage and for housing, and if tax is levied on EPF, it would be a big blow to salaried class,” he said.
The Union budget for 2016-17 proposed taxing 60 per cent of withdrawals from the Employee Provident Fund (EPF) on contributions to be made after April 1, unless the sum is reinvested in pension product such as an annuity.
Source: The Indian Express