In the face of all round attack, Finance Minister Arun Jaitley today completely rolled back the controversial proposal to tax the employees’ provident fund (EPF) at the time of withdrawal.
Taking the first opportunity available, he made a suo motu statement in the Lok Sabha in which he also announced withdrawal of imposing monetary limit for contribution of employers to provident and superannuation fund of Rs 1.5 lakh for taking tax benefit.
Jaitley, however, left untouched the proposal tax exempt 40 per cent of National Pension Scheme and services provided by EPFO to employees.
“In view of the representations received, the government would like to do comprehensive review of this proposal and therefore I withdraw the proposals in para 138 and 139 on my budget speech. The proposal of 40 per cent exemption given to NPS subscribers at the time of withdrawal remains,” the Minister said.
The Minister had earlier indicated that he would address the concerns on retirement tax when he replies to the debate on Budget 2016-17 in Parliament.
In his Budget for 2016-17, Jaitley had proposed to tax 60 per cent of the corpus of the EPF contributions created after April 1, 2016 at the time of withdrawal. He proposed to exempt these from income tax if the amount was invested in pension annuity scheme.
The proposal came under immediate fire from both employee unions and political parties who said the government was taxing employee when they need the funds most.