New Delhi: Under pressure and facing severe criticism, finance minister Arun Jaitley on Tuesday announced a rollback of the proposal in the Union Budget to tax Employees’ Provident Fund (EPF) withdrawals.
The finance minister also withdrew the proposal to impose a monetary limit on contributions by employers to the provident and superannuation fund at Rs 1.5 lakh for taking tax benefit.
However, in a major relief to those who are investing in the National Pension System (NPS), Mr Jaitley retained his Budget proposal that 40 per cent of the corpus of NPS subscribers during withdrawal will now be tax exempt.
“A number of representations have been received from various sections of society, including members of Parliament, suggesting that this change will force people to invest in annuity products even if they are not willing to do so,” Mr Jaitley said in a suo motu statement in the Lok Sabha taking back the proposal to tax EPF withdrawals.
Congress takes credit for rollback
Finance minister Arun Jaitley on Tuesday said the main argument was that employees should have a choice of where to invest. “Theoretically, such freedom is desirable but it is important for the government to achieve policy objectives by the instrumentality of taxation. In the present reform, the policy objective is not to get more revenue but to encourage people to join the pension scheme,” said Mr Jaitley.
He said the government had got various other suggestions, which can also achieve the same policy objective of encouraging people to join the pension scheme.
The BJP welcomed the rollback and took a jibe at the Congress after some of its leaders tried to take credit for the government’s rethink, saying that it could claim credit for the passage of the GST Bill and other Bills if it agrees to help the treasury benches.
Congress vice-president Rahul Gandhi said the attempt to tax the middle classes’ safety net was “morally” wrong, and that the government was forced to listen to the people and roll back the “patently unfair” tax on EPF.
