Growing voices against taxing withdrawals from the Employees' Provident Fund (EPF), and an intervention on the issue by Prime Minister Narendra Modi himself, has apparently forced Finance Minister Arun Jaitley to roll back the budget proposal.
The minister announced the rollback in the post-budget discussion Tuesday, March 8, in Parliament. "The taxes were well-meaning, and intended to encourage a pensioned society," he said, besides announcing a review of the tax proposal.
Jaitley had asserted in an earlier statement the move was never a revenue-garnering exercise, but meant to nudge people to invest a part of their corpus into annuities to ensure access to pension after retirement, reported the Mint.
The EPF withdrawal-tax proposal would have made 60 per cent of the amount deposited in the EPF account of an employee be taxable at the time of withdrawal â€” unless invested in annuity products. The remaining 40 per cent of the saving will be tax free. The period of implementation would have been from April 1, 2016.
The announcement had prompted the salaried class to oppose any move to tax its retirement savings. However, the government authorities had clarified that of the 3.7 crore EPF subscribers, the tax would only affect 70 lakh people earning more than Rs 15, 000 per month, reported the Mint.