A day after the budget, the government had hinted that it was open to modify the rule to tax only the interest earned on 60% of the EPF contributions made after April 1, 2016.
In what will bring cheers to millions of salaried class individuals in the country, Finance Minister Arun Jaitley on Tuesday rolled back the controversial budget proposal to tax EPF withdrawals.
Sources said that an official level meeting was held in PMO on the EPF tax issue on March 3, 2016, adding that the Finance Minister is likely to make an announcement on the exemptions on the floor of House when he replies to budget.
“Tax proposal for NPS scheme has been retained”.
Newsletter has been successfully subscribed. Following criticism from people affected, the opposition, trade unions and even RSS affiliates, the Finance Minister had at a meeting of NDA lawmakers last Tuesday explained the proposal and had said that any decision on a reversal would be taken by the Prime Minister. “Employees should have the choice of where to invest. Theoretically, such freedom is desirable, but it is important for the government to achieve policy objectives by instrumentality of taxation”, he said. “Our intention was to encourage more and more employees join the national pension scheme”.
“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”. There is at present no tax on withdrawal from employee provident funds and other superannuation funds.
The excluded employees would primarily be the ones drawing statutory wages of up to Rs 15,000 per month.