Trade unions on Friday opposed the government's move to deduct tax at source (TDS) on provident fund (PF) withdrawals and said they would ask the Labour Ministry to keep the decision on hold.
The Employees' Provident Fund Organisation (EPFO) had issued a notification on Thursday saying that it would deduct TDS on PF withdrawals starting from 1 June in cases where savings exceed ₹30,000 and employees serve less than five years in an organisation.
"We will oppose the government's move of deducting TDS (Tax Deducted at Source) at PF withdrawals. We have decided to write to the Labour Minister for keeping this notification in abeyance," All India Trade Union Congress Secretary DL Sachdev told PTI.
As per the EPFO order, the PF withdrawals come under taxable income "if the cumulative service period of a subscriber with present as well as former employers is less than 5 years."
"We had opposed this move earlier also. Even the EPFO had proposed to exempt cases where accumulations were less than Rs 2,00,000. PF withdrawals should not be taxed," said another EPFO trustee and Hind Mazdoor Sabha Secretary AD Nagpal.
The EPFO circular say that TDS will be deducted at 10% 'provided permanent account number (PAN) is submitted.'
"While the government is giving so many concessions to investors and industrialists, it is injustice to workers. It's wrong to tax PF withdrawals," said AK Padmanabhan, President of Centre of Indian Trade Unions President and an EPFO trustee too.
However, the EPFO said there will be no TDS deductions for the claimants who submit Form 15G or 15H. Form 15H is for senior citizens (above 60 years of age) while Form 15G is for claimants below the age of 60 years.
According to the EPFO circular, TDS will be deducted at the maximum marginal rate of 34.608%, if a claimant fails to produce PAN, Form 15G or 15H.