New Delhi, March 8
Facing all-around attack, Finance Minister Arun
Jaitley on Tuesday withdrew his Budget proposal to tax employees’
provident fund (EPF) withdrawals.
Jaitley had in his Budget for 2016-17
proposed to tax withdrawal of 60 per cent of accumulations in the
employee provident fund after April 1, 2016.
This was criticised by all employees unions as well as political parties.
"In view of the representations received, the
government would like to do comprehensive review of this proposal and therefore
I withdraw the proposals in para 138 and 139 on my budget speech. The proposal
of 40 per cent exemption given to NPS subscribers at the time of withdrawal
remains," the Minister said.
” Jaitley said in a suo motu
statement in the Lok Sabha.
{"138.
In case of superannuation funds and
recognized provident funds,
including EPF, the same norm of 40%
of corpus to be tax free will apply in
respect of corpus created out of
contributions made after 1.
4.2016.
139.
Further, the annuity fund which goes
to the legal heir after the death
of pensioner will not be taxable in
all three cases. Also, we are proposing a
monetary limit for contribution of
employer in recognized Provident and
Superannuation Fund of 1.5 lakh per
annum for taking tax
benefit."}
He, however, stated that 40 per cent
exemption given to the National Pension Scheme (NPS) subscriber at the
time of withdrawal remains.
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 up to Rs 15,000
per month. Employees Provident Fund Organisation (EPFO) has a total
subscriber base of 3.7 crore. — PTI
