Govt may Consider Partial Rollback of Tax on EPF Withdrawal
Under the rising pressure from all corners, the Union government today has promised to consider the demands for a partial rollback of the proposed tax...
Under the rising pressure from all corners, the Union government today has promised to consider the demands for a partial rollback of the proposed taxation on EPF withdrawals, and a ceiling on employers’ contribution. However a press note issued by the Finance Ministry made it clear that PPF will continue to be tax exempt.
Earlier in the day, Revenue Secretary Hashmukh Adhia said only 60 per cent of interest on contributions made after April 1, 2016 will be taxed and that the principal amount of contribution will remain untouched at the time of withdrawal.
The note said that the new tax proposal was aimed at taxing only the high salaried individuals totalling about 70 lakh people out of the 3.7 crore employee provident fund (EPF) members. About 3 crore individuals come under the statutory wage limit of Rs 15,000 per month so will not be affected by the proposed changes.
Finance Minister Arun Jaitley in his Budget for 2016-17 yesterday had proposed that 60 per cent of the withdrawal on contribution to employee PF made after April 1 this year will be subject to tax. This would apply to superannuation funds and recognised provident funds including EPF.
The proposal came under immediate attack from various employees unions including RSS-backed BMS, and political parties who termed it as "an attack on the working class and a clear case of double taxation."
The Finance Ministry issued a press note containing a clarification about the proposed changes in the tax treatment of recognised PFs and recognised pension schemes noting that there seems to be some amount of lack of understanding about the changes made in the Budget on the issue.
"We have received representations today from various sections suggesting that if the amount of 60 per cent of corpus is not invested in the annuity products, the tax should be levied only on accumulated returns on the corpus and not on the contributed amount.
"We have also received representations asking for not having any monetary limit on the employer contribution under EPF, because such a limit is not there in NPS. The Finance Minister would be considering all these suggestions and taking a view on it in due course," the press note said.