The government moved into damage control mode on Tuesday, hinting at a possible rollback of the controversial budget proposal to tax provident fund withdrawals.
In the budget presented by finance minister Arun Jaitley, the government had announced that 40% of an individual’s accumulated corpus in the employees’ provident fund (EPF) and the National Pension System (NPS) schemes would not be taxed at the time of withdrawal.
This was taken to mean that the remaining 60% of the corpus was taxable.
At present, withdrawal from EPF is entirely tax-free and the budget proposal has triggered howls of protest from subscribers and labour unions that have termed it as anti-worker.
The government hinted on Tuesday that it was open to modifying the rule to tax only the interest earned on 60% of the EPF contributions made after April 1, 2016.
“We have received representations today from various sections suggesting that if the amount of 60% of corpus is not invested in the annuity products, the tax should be levied only on accumulated returns on the corpus and not on the contributed amount,” the finance ministry said in a statement.
The Finance Bill 2016 has also proposed a monetary ceiling of Rs 1.5 lakh on employers’ contribution to PF accounts.
The finance ministry indicated it was willing to revisit the decisions.
“We have also received representations asking for not having any monetary limit on the employer contribution under EPF, because such a limit is not there in NPS. The finance minister would be considering all these suggestions and taking a view on it in due course,” the statement said.
“Two demands are coming, which will be looked at when there is a final call that will be taken,” revenue secretary Hasmukh Adhia told HT.
Trade unions, including the RSS-affiliated Bharatiya Majdoor Sangh (BMS), have slammed the government’s move to tax the provident fund money, calling it “disgusting” and a gross injustice to the workers.
“The government move is disgusting and we condemn it strongly. We will try to pursue the government to roll it back,” BMS president BN Rai told HT.