Roll-back is back. Arun Jaitley withdraws EPF tax

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Roll-back is back. Arun Jaitley withdraws EPF tax

Catch Team @catchnews

The proposal

  • Jaitley's Budget levied tax on 60% of EPF at time of withdrawal
  • That tax now stands cancelled
  • 40% rebate on NPS stays

More in the story

  • What made Jaitley go back on his decision?
  • What do political parties say?

Under pressure from middle-class tax payers, Union Finance Minister Arun Jaitley, on Tuesday rolled back the proposal to tax withdrawal from Employees Provident Fund (EPF).

Jaitley announced a tax on 60% of the EPF amount at the time of withdrawal in his recent Budget Speech.

"In view of the representation received, the government would like to do a comprehensive review of this proposal and therefore I withdraw this proposal," he said in Lok Sabha.

Read- Govt to tax interest on EPF: what's the point of saving for retirement?

The government has also withdrawn the proposal to limit tax-free contribution by the employer to the provident fund of an employee to Rs 1.5 lakh per annum.

However, the 40% rebate proposed for the National Pension Scheme (NPS) will continue. NPS is currently taxed fully on withdrawal.

PMO's decision

According to media reports, while Jaitley was clear about taxing EPF withdrawals, Prime Minister Narendra Modi objected to it after reading the pulse of the middle class that expressed itself through various platforms.

On Budget day, when Jaitley announced the proposal, Twitter was abuzz with the criticism of the government to tax the middle class' savings even as the government had not offered any tax rebate to small tax payers.

#rollbackEPF was one of the top trends. People expressed their anger over the government's decision.

The tax would have hit 70 lakhs of a total 3.7 crore EPF subscribers: govt estimates

Even Bhartiya Mazdoor Sangh, the labour organ of Rashtriya Swayamsevak Sangh, opposed the proposal and demanded a complete rollback.

Opposition parties, including the Left parties and Congress, put up a united front against the decision.

After the roll-back announcement, Congress Vice-President Rahul Gandhi sought to take credit for the government's decision.

"I told the government that they should not oppress the salaried-class. So, the rollback of the government is a good decision," he said.

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"Whenever somebody is being oppressed or victimised, I tend to try and help those people. I felt that the salaried and the middle-class people were being hurt by the government. So, I decided to put some pressure. I am happy they have got some relief," he added.

In his defense, Jaitley said: "Employees should have the choice of where to invest. Theoretically, such freedom is desirable. But it is important for the government to achieve policy objective by instrumentality of taxation. In the present form, the policy objective is not to get more revenue but to encourage people to join the pension scheme," Jaitley said.

According to government estimates, of a total 3.7 crore EPF subscribers, the tax would have hit only 70 lakh subscribers, earning more than Rs 15,000 per month.

Edited by Joyjeet Das

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Catch Team

Catch Team @catchnews