Govt says taxation of EPF contribution will not affect genuine contributors
- The rule is to ensure that high net worth individuals who post huge sums of money per month in their EPF accounts do not get to misuse the provision of assured high interest.
The government has said that the decision to make the interest earned on Employees’ Provident Fund (EPF) of ₹2.5 lakh and above a year taxable at the prevailing income tax rates has been taken to remove disparity among contributors.
A statement released from the Department of Revenue stated that the rule has been brought to ensure that high net worth individuals who post huge sums of money per month in their Employee Provident Fund (EPF) accounts do not get to misuse the provision of assured high interest and earn returns at the cost of other honest taxpayers’ money.
The statement also outlined that out of more than 4.5 crore contributors’ EPF accounts, more than 1.23 lakh accounts belong to high net worth individuals (HNI)who contribute huge sums to their EPF accounts. The statement also pointed out that the contribution of these high net worth individuals was to the tune of ₹62,500 in FY 2018-19 and the government was paying an assured interest at the rate of 8% with tax exemptions to these very high-income category persons. The department of revenue said that the government wants to put an end to this practice to benefit low and middle income, salaried class and other taxpayers of the nation.
The statement, without naming any of the high net worth individuals, said that one of the high net worth individual’s accounts has more than ₹103 crore. The top 20 high net worth individuals have close to ₹825 crore in their accounts and the top 100 HNI contributors have more than ₹2,000 crore.
“These HNI contributors who are 0.27 % of the total number of EPF account holders have on an average a corpus of ₹5.92 crore per person and thereby were earning very huge sum at the rate of Rs. 50.3 lakh per such person per annum as tax-free assured interest in a very scheming manner at the cost of the salaried class and other taxpayers,” the statement said.
The government maintained that the decision taken to tax EPF contributions of ₹2.5 lakh and above in the budget has been taken based on ‘the principle of equity’ among contributors.