Arun Jaitley withdraws controversial EPF tax proposal; victory for the salaried

FP Staff March 08, 2016 19:47:21 IST
Arun Jaitley withdraws controversial EPF tax proposal; victory for the salaried

Following widespread concern over the proposed tax on withdrawal from the Employees' Provident Fund (EPF) contributions, the government has decided to withdraw the proposal. The announcement was made by Finance MInister Arun Jaitley in the Lok Sabha on Tuesday.

"In view of representations received, the government would like to do a comprehensive review of this proposal and therefore I withdraw the proposal," Jaitley said in a suo motu statement in Lok Sabha, amid cheering from his party colleagues in the Parliament. He also clarified that the intention was not to make revenue from the EPF but to push the private sector employees to take up annuity schemes.

He, however, stated on Tuesday that 40 percent exemption given to National Pension Scheme (NPS) subscriber at the time of withdrawal remains.

Arun Jaitley withdraws controversial EPF tax proposal victory for the salaried

Arun Jaitley. PTI

"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 minister had made the proposal to tax 60 percent of the EPF corpus at the withdrawal in the Budget 2016. The proposal had given rise to widespread protests from the salaried class. What made matters worse for the government was that it took the decision at a time when there is a mistrust among the general public that the Narendra Modi government has failed to live up to the promises made before the elections.

The announcement drew quick reactions on Twitter, with some thanking the union government for the rollback, and some others

"This is a draconian act and will be a killer blow to already tax burdened salaried class which pays 30% income tax + 30% taxes in indirect form i.e customs, excise, service tax etc," an online petition seeking to withdraw the tax said.

The trade unions have said the tax amounts to forcing employees to invest in pension annuity schemes.

The proposal would not have impacted 3.26 crore EPFO subscribers drawing statutory wage of upto Rs 15,000 per month. Employees Provident Fund Organisation (EPFO) has a total subscriber base of 3.7 crore.

After the protests, there were reports that the officials of Prime Minister's Office (PMO), the finance ministry and the labour ministry met to discuss the issue.

Even the RSS-affiliated Bharatiya Mazdoor Sangh (BMS) also opposed the proposal and demanded a complete rollback.

"We are talking to government representatives and they are considering our concern. We are in regular touch with them. We hope some announcement in a day or two," BMS general secretary Vijesh Upadhyay had told IANS.

The BMS leaders have met Labour Minister Bandaru Dattatreya, Power Minister Piyush Goyal and some other government representatives in this regard.

With PTI and IANS

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