Jaitley To Spell Out Final Stand On Taxing EPF In Budget Debate
The intention behind the move is to make India more insured and pensioned society as the Budget provision provides for no tax on EPF withdrawal if it is invested in pension-based annuities
Photo Credit : PTI
Facing flak for proposing a tax on employee provident fund withdrawals, Finance Minister Arun Jaitley on Wednesday (02 March) said he will spell out the final decision on the matter when he replies to the debate on Budget in Parliament.
After Budget 2016-17 proposed taxing 60 per cent of the withdrawal from Employee Provident Fund on contributions to be made after April 1, the government on Tuesday hinted of a partial rollback.
At a meeting organised by industry chambers on Budget provisions, Jaitley said the move was aimed at high-salaried class and not the overwhelming section of 3.7 crore EPF members.
"The revenue department had considered various aspects of the National Pension Scheme and Employee Provident Fund Organisation.
“Their intention is not revenue raising, that was not the principal intention," he said.
The intention behind the move is to make India more insured and pensioned society as the Budget provision provides for no tax on EPF withdrawal if it is invested in pension-based annuities.
"The EPFO has about 3.7 crore (37 million) members of which about 3 crore (30 million) members are those in the earning category of Rs 15,000 and below (statutory wages).
“For them there is no change," he said.
"It is only those private sector employees who have just joined that this will impact them."
With the proposal being attacked by various employees unions, including RSS-backed BMS and political parties who termed it as ‘an attack on the working class and a clear case of double taxation,’ the government on Tuesday said it was to limit the tax only to the interest accrued.
"Now there has been some reactions.
“When the debate comes up in Parliament I will give the government's response as to what decision we finally take in this matter," he said.
Jaitley said the objective behind the proposal was that no tax is levied on 40 per cent of the withdrawal which can be used for meeting retirement commitments.
The balance, he said, can be converted into annuity and the person would get a regular pension and he does not pay tax.
"There is also a change in the law that when inheritance comes in there is no tax payable," he said.
"This was intended to incentivise people in the private sector also to use it as a kind of pension fund and to disincentive those who otherwise would indulge in consumption of that fund this move was made."
Meanwhile, the government on Wednesday told Rajya Sabha that it is in discussion with all stakeholders and will consider the issue as the Opposition parties joined hands in the House to corner it.
"We are in discussion with stakeholders. There are many stakeholders. Now I cannot reveal many things. Our government is considering all options," Labour Minister Bandaru Dattatreya said when the issue came up during Question Hour.
"We are discussing with all stakeholders. We are in touch with the Ministry of Finance. Government will also consider these issues. Up to now I can say this," he said without disclosing further details on the issue.
The Minister's remarks came amid indications that the government is reconsidering the proposal after facing flak from political parties and trade unions including some RSS affiliates.
Tapan Kumar Sen of CPI-M, however, took strong objection to the minister's claim, saying that he being a stakeholder has not been consulted at all.
"At no point of time stakeholders agreed to the taxing of the Provident Fund. Please do not put the gun on stakeholders for this offence," he said.
The minister further said that the government's main focus is give social security to the workers in the unorganized sectors by bringing them under the purview of EPF.
Dattatreya also chose the occasion to seek the support of various parties in the passage of a bill seeking to amend the EPF Act, which is stuck.
He said the amendment seeks to bring down the total number of workers in a unit covered under the EPF Act from the present 20 to 10 so that more people are brought under the ambit of coverage.