Arun Jaitley, Indian Finance Minister, has announced on Wednesday, spelling out the final decision on the budgetary proposal for imposing tax on withdrawal from employee provident fund (EPF). The finance minister has opted for a reconsidered final decision upon criticism while addressing the parliament in a budgetary debate.
In 2016-2017 draft budgets, 60% tax has been imposed on withdrawal from Employee Provident Fund (EPF) on contributions to be made after April 1. However, Jaitley has hinted yesterday for a partial rollback. The move has been aimed at high salaried class and not the overwhelming section of 3.7 crore EPF members, reports The Economic Times quoting Jaitley while addressing a meeting organized by industry chambers on Budget provisions.
<p>Through this move, Indian government intends to make India more insured and pensioned society. To facilitate this, the proposed budget leaves provision for no tax on EPF withdrawal if it is invested in pension-based annuities, according to a report published in The Times of India.
The EPF office has around 37,000,000 members, majority of which are under statutory wages earning IRs 15,000 and below. The proposed budgetary provision will impact those private sector employees who have just joined without affecting the statutory earners, reports The Financial Express. However, the proposal has been criticized by several employees' unions and political parties referring the proposed provision as an attack on the working class. They have also accused the government for imposing double taxation. The government has yesterday defined the move intending to limit the tax only to the interest accrued. Jaitley has however acknowledged the reactions from rights bodies backed by political parties. He has committed to deliver the government's response in this regard while his addressing in the parliamentary debate. The Indian Finance Minister has also narrated that no tax is levied on 40% of the withdrawal, sufficient to meet the retirement related commitments. The balance may be converted into annuity and the person will get a regular pension leaving no deduction for the government exchequer. Furthermore, the proposed budget also includes a change in provisions for no tax in case of withdrawals of the pension funds by the inheritors. The proposed budget also intends to reward people in the private sector to use EPF as a kind of pension fund. At the same time, it will penalize those who will indulge in consumption of the fund beyond normal retirement age.
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