Govt to reconsider decision on EPF tax deduction

0Shares

NEW DELHI: Under all-round attack, the government on Tuesday promised to consider demands for a partial rollback of the proposal to tax 60 per cent of withdrawals from provident fund and a ceiling on employers contribution but 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.

However, in the evening a government press note said a proposal to tax only interest and not principal is under consideration.

After that Adhia also said there was a demand being made to this effect and it would be taken into consideration.

The press 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.

He also proposed a monetary limit for contribution of employer in recognised PF and superannuation fund at Rs 1.5 lakh per annum for taking tax benefit. 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. All contributions and interest accrued to EPF before April 1, 2016, will not attract any tax on withdrawal. The press note said the purpose of this reform of making the change in tax regime is to encourage more number of private sector employees to go for pension security after retirement instead of withdrawing the entire money from the Provident Fund Account. 

Be Part of Quality Journalism

Quality journalism takes a lot of time, money and hard work to produce and despite all the hardships we still do it. Our reporters and editors are working overtime in Kashmir and beyond to cover what you care about, break big stories, and expose injustices that can change lives. Today more people are reading Kashmir Observer than ever, but only a handful are paying while advertising revenues are falling fast.

ACT NOW
MONTHLYRs 100
YEARLYRs 1000
LIFETIMERs 10000

CLICK FOR DETAILS


Observer News Service

Leave a Reply

Your email address will not be published.

KO SUPPLEMENTS

Play Indias most popular jackpot and slot games at 7Jackpots get a unique casino bonus on your first deposit.