Govt buries EPF tax

FM retains tax exemption for National Pension System

Just over a week after the announcement, Finance Minister Arun Jaitley on Tuesday rolled back his controversial Budget proposal to tax Employees’ Provident Fund ( EPF) withdrawal. The Budget had announced that 40 per cent of the total corpus withdrawn from the EPF would be tax- exempt and the balance 60 per cent would be taxable unless the amount is used to buy an annuity product. Jaitley also took back his earlier proposal to tax contribution made by an employer beyond Rs.1.5 lakh a year to EPF. Both the proposals had drawn strong protest from the Opposition, trade unions and the salaried class.

Jaitley, however, retained a proposal not to tax 40 per cent of money withdrawn from National Pension System( NPS). This means that only balance 60 per cent would be taxed against the current practice of taxing the entire amount withdrawn from NPS.

Making a suo motu statement in the Lok Sabha on the issue, Jaitley said, “ In view of the representations received, the government would like to do comprehensive review of this proposal and therefore I withdraw the proposals in paragraph 138 and 139 of my Budget speech. The proposal of 40 per cent exemption given to NPS subscribers at the time of withdrawal remains.” Paragraph 138 proposed to tax money withdrawn from EPF beyond 40 per cent, if the sum is not invested in annuity. Paragraph 139 proposed to tax contribution made by an employer exceeding Rs.1.50 lakh in EPF a year. Both the proposals were to come into effect from April 1, 2016.

After this, no amount withdrawn from EPF account would be taxed, whether it is invested in annuity or not. In other words, the present situation continues. The FM did not alter paragraph 137 of the speech which proposed not to tax 40 per cent of the corpus withdrawn from NPS at the time of retirement.

Jaitley had earlier indicated that he would address the concerns on retirement tax when he replies to the debate on Budget 2016- 17 in Parliament, which would start from Wednesday in the Lok Sabha.

The Budget proposals on EPF tax drew flak from both employee unions and political parties who said the government was taxing employees at the fag- end of their career, when they needed money the most.

“The government has been forced to roll it back under continuous pressure from the unions,” said A K Padmanabhan, president of Centre of Indian Trade Unions ( CITU) and a board member of EPF Organisation.

The government had justified the move saying the attempt was to create a pensioned society.

Just over a week after the announcement, Finance Minister Arun Jaitley on Tuesday rolled back his controversial Budget proposal to tax Employees’ Provident Fund ( EPF) withdrawal. The Budget had announced that 40 per cent of the total corpus withdrawn from the EPF would be tax- exempt and the balance 60 per cent would be taxable unless the amount is used to buy an annuity product. Jaitley also took back his earlier proposal to tax contribution made by an employer beyond ? 1.5 lakh a year to EPF. Both the proposals had drawn strong protest from the Opposition, trade unions and the salaried class.

Jaitley, however, retained a proposal not to tax 40 per cent of money withdrawn from National Pension System( NPS). This means that only balance 60 per cent would be taxed against the current practice of taxing the entire amount withdrawn from NPS.

Making a suo motu statement in the Lok Sabha on the issue, Jaitley said, “ In view of the representations received, the government would like to do comprehensive review of this proposal and therefore I withdraw the proposals in paragraph 138 and 139 of my Budget speech. The proposal of 40 per cent exemption given to NPS subscribers at the time of withdrawal remains.” Paragraph 138 proposed to tax money withdrawn from EPF beyond 40 per cent, if the sum is not invested in annuity. Paragraph 139 proposed to tax contribution made by an employer exceeding Rs.1.50 lakh in EPF a year. Both the proposals were to come into effect from April 1, 2016.

After this, no amount withdrawn from EPF account would be taxed, whether it is invested in annuity or not. In other words, the present situation continues. The FM did not alter paragraph 137 of the speech which proposed not to tax 40 per cent of the corpus withdrawn from NPS at the time of retirement.

Jaitley had earlier indicated that he would address the concerns on retirement tax when he replies to the debate on Budget 2016- 17 in Parliament, which would start from Wednesday in the Lok Sabha.

The Budget proposals on EPF tax drew flak from both employee unions and political parties who said the government was taxing employees at the fag- end of their career, when they needed money the most.

“The government has been forced to roll it back under continuous pressure from the unions,” said A K Padmanabhan, president of Centre of Indian Trade Unions ( CITU) and a board member of EPF Organisation.

The government had justified the move saying the attempt was to create a pensioned society.

CENTRE’S PREVIOUS FLIP- FLOPS:

Finance Minister Arun Jaitley’s withdrawal of Budget proposal to levy tax on Employees Provident Fund ( EPF) withdrawals is one of several occasions in past 21 months when the Centre has reconsidered its position:

MGNREGA: Inone of his early speeches in the Lok Sabha, PM Narendra Modi had trashed it as a living monument to Congress’ failures. In this Budget, the government has allocated highest- ever funds for the scheme

Aadhaar Bill: BJP had rejected UPA’s National Identification Authority of India Bill, 2010. However, the govt is now pushing for a Money Bill, which is almost identical

Land Bill: Centre issued ordinances and vowed to amend UPA’s 2013 Land Bill to make it pro- industry. The Bill is now slated to be withdrawn

MAT: Rolled back past cases of Minimum Alternate Taxon foreign portfolio investors

ITR forms: Government had to drop new Income- Tax Return forms introduced in March  2015 after being criticised for seeking details like foreign travels and dormant bank accounts

Insurance Laws(Amendment) Bill: BJP had blocked the Insurance Bill during UPA rule. Once in power, it ensured passage of the Bill in both Houses

Internet porn ban: Last August, Centre moved to block access to 850 pornographic websites. However, after criticism, itrestricted the ban to child pornography

Business Standard, New Delhi, 9th March 2016