“The goal of the proposed reform in tax regime was to encourage more number of private employees to go for pension security after their retirement instead of withdrawing their entire money from their provident fund account”, he said. The motive is clearly honest, but the way it was implemented made little sense as employees were indirectly “forced” to invest in those schemes which Govt. wanted. “The proposal of 40 per cent exemption given to NPS subscribers at the time of withdrawal remains”, the Minister said.
Advertisement
The budget had announced that only 40% of the total corpus withdrawn from the EPF and NPS on retirement will be tax-exempt and the remaining 60% taxable unless the amount is used to buy an annuity product. Theoretically such freedom is desirable, but it is important the government to achieve policy objective by instrumentality of taxation.
“I felt middle-class people were being hurt by the government, so I made a decision to put some pressure on the government.my pressure did work”, said Rahul. Jaitley clarified the governments stand on EPF in Lok Sabha and said his main argument is that employees should have choice of where to invest and the idea is to make people join the pension scheme.
Finance Minister Arun Jaitley on Tuesday withdrew the tax levied on the Employees Provident Fund (EPF), which he implemented during the Budget 2016-17. Till now you paid a tax on the amount kept as lump sum, but now you don’t pay a tax on 40% of the corpus withdrawn.
These analysts argued that the proposal to tax EPF was applied only to 60 lakh out of 3.7 crore employees who contribute to EPF on an annual basis; which is 16% of all employees. “EPF is the safety net of the employees and imposing a tax on this is wrong”.
The finance minister, however, left untouched the proposal to tax exempt 40 per cent of National Pension Scheme and services provided by the EPFO to employees.
Employees’ provident fund is a popular social security for the salaried class that is maintained by a statutory authority.
Advertisement
The government will now review the Budgetary proposal in view of the representations received.
