Employee provident fund tax draws flak from young employees
Most millennials in fact want to opt out of contributing towards PF.Updated: Mar 02, 2016, 11:46 IST
The plan to tax employee provident fund (EPF) withdrawals, announced in the Union Budget 2016, has drawn flak from salaried employees across sectors. So much so, that #RollBackEPF became the top trend on Twitter, a platform being actively used by the government for connecting to the common man.
As per the government, while PPF remains exempt from tax on withdrawal, the interest amount on contributions to EPF made after April 1, 2016 are subject to tax. Sixty per cent of this interest amount, accrued after April 1, will be taxed.Salaried employees, especially millennials (those born between 1980s and early 2000s), have expressed serious discontentment over the government’s 40:60 rule of deducting tax from their savings.
PF deduction, for most millennials, involves a considerable amount of deduction from their in-hand salary. Most of them agree that the compulsory deduction of PF from their base salary puts a monthly strain on their expenses, but they have been content knowing that the amount will be added to their future savings.
“We save money in PF to avoid taxes, but now we have a new problem. How are we supposed to save money then? The government wants us to remain poor. In fact, they should have given more leverage to the salaried class. It shouldn’t be a compulsory thing,” says Renu Vats, a school teacher.
Manvi Bhatia, a public relations professional says, “Our savings are parked in EPF. Today, with our limited salaries, it gets very difficult to make additional savings.”
Most millennials in fact want to opt out of contributing towards PF. “There are very few options for us to save, PF being one of them. If the government applies tax to withdrawals, then I would rather like to opt out of depositing money for PF, rather than paying tax on it,” says Nitin Kanhekar, a marketing manager.
A present, EPF is an exempt-exempt-exempt or EEE product which makes it a tax-free investment, even on withdrawal and most salaried millennials see it as a crucial investment for their superannuation. As Ashish Sharma, a marketing manager says, “I am already paying income tax and professional tax from my salary currently. PF is supposed to be my saving for the future. Paying a tax on my savings, irrespective of the percentage of tax, is highly demotivating. Given the long process of applying for PF withdrawal, it would be cumbersome to even go through the whole process, that too for a considerably lesser amount of money I will get if the taxes are applied finally.”