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No tax on EPF: How Narendra Modi swung into action to save his govt's image

The Narendra Modi government has bowed to public pressure and completely withdrawn its unpopular budget proposal to tax 60 percent of an individual's EPF corpus at the time of withdrawal.

The fact that the issue was listed as a business to be taken up today in the Lok Sabha soon after the Question Hour itself was an indication that the government was very keen to put an end to the controversy, which was heavily tilted against the Modi government.

Sources said Prime Minister Narendra Modi had received adverse feedbacks on this budgetary proposal from various quarters, including those from his own party. He had spoken to the finance minister and advised him to withdraw it. As for the official niceties, it was decided that the government would do a comprehensive review of the subject before mulling over its future course of action.

The move was widely criticised and seen as a proposal that negatively impact the salaried class.

The feedbacks Modi received was so strong, as also the outrage of the salaried reflected on the social media, that he didn’t want to wait for long to take an otherwise difficult call to roll back.

Prime Minister Narendra Modi. PTI

Prime Minister Narendra Modi. PTI

It was thus decided that the Finance Minister would make an announcement to this effect in the Lok Sabha on Friday. However, it did not happen because the House was adjourned for the day due to death of former Speaker PA Sangma.

On account of Shivratri, Parliament did not function on Monday and thus on the first available opportunity on Tuesday Jaitley made the brief statement about the rollback.

“The argument was that the employees should have freedom to invest,” he said, adding that the idea was not to get revenue but to encourage the employees to invest in pension annuity schemes. However, given the representations the government received including from the MPs, a comprehensive review would be done.

The government’s move to tax major part of EPF withdrawal had taken the sheen out of the Budget 2016, which has been seen positively otherwise for the emphasis on agriculture, rural India and infrastructure.

Tax on EPF withdrawals was the single biggest negative point that could have impacted the public perception about the government. Remember, the salaried class has been Modi’s strongest and vocal supporters in the run-up to 2014 parliamentary elections.

On his part, Modi too had been focussing on the issues the middle class faces. In fact, it is after a long-long time any politician of his stature is talking about the middle and neo-middle class. Tax on EPF was something that couldn’t be taken kindly by the class which vigorously rooted for him. It was somewhat incumbent on Modi to do a course correction.

Also Modi had placed his personal stakes in 2016 annual budget. No prime minister had ever done it. This why he said in his Mann Ki Baat that presentation of the budget for the year was like a board exam for him where 125 crore people of the country would be his evaluators.

Now that he has done away with the controversial tax proposal on EPF he can safely consider himself passed the exam. He will have to work harder on delivery to fetch better marks.

Updated Date: Mar 08, 2016 21:45 PM

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