After receiving flak from opposition and trade unions, the Modi government announced in Parliament that the proposal to tax 60 per cent of Employees’ Provident Fund has been withdrawn.
Clarifying government’s stand on EPF in Lok Sabha, Finance Minister Arun Jaitley said, “We propose to withdraw the tax… the tax proposal for NPS scheme has been retained. Our intention was to encourage a pensioned society”.
“The main argument is that employees should have the choice of where to invest, the idea is to make people join pension scheme.”
Several Unions threatened to stage a protest against the government on Thursday seeking immediate reversal of the Centre’s proposal.
“The move to tax EPF will be a terrible blow to six crore employees covered under the EPF Act… The BJP-led central government is playing with their future. The proposal must be rolled back immediately,” Delhi Congress chief Ajay Maken had said at the protest at Jantar Mantar.
Maken said, according to the budget proposal, an employee will have to invest 60 per cent of the PF in annuity “as per wishes of government” if he does not want to pay tax on the amount he receives at the time of retirement.
He claimed the move was aimed at helping insurance companies, particularly private ones.
“Salaried people depend on their salaries for their living and on retirement they depend on their EPF savings for their daughter’s marriage and for housing, and if tax is levied on EPF, it would be a big blow to salaried class,” he said.
The Union budget for 2016-17 proposed taxing 60 per cent of withdrawals from the Employee Provident Fund (EPF) on contributions to be made after April 1, unless the sum is reinvested in pension product such as an annuity.
