BackWill Arun Jaitley roll back tax on EPF?
Arun Jaitley is expected to make a statement in Parliament on Tuesday clearly spelling out the government's stand on the issue
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New Delhi: With reports of Prime Minister Narendra Modi intervening on the issue of tax levy on withdrawals from the Employees’ Provident Fund (EPF), expectations are high that finance minister Arun Jaitley will announce a rollback.
But it remains to be seen if the government will go in for a complete withdrawal of the tax or retain the tax only on the interest component and exempt the principal amount or defer its implementation.
Jaitley is expected to make a statement in Parliament on Tuesday clearly spelling out the government’s stand on the issue.
In the budget presented by Jaitley, the government had announced that 40% of the total corpus withdrawn at the time of retirement will be tax-exempt, both under EPF and National Pension System (NPS). This made the remaining 60% of the EPF corpus taxable unless the amount is invested in an annuity product. At present, withdrawal from EPF is entirely tax-free.
The announcement prompted the salaried classes to oppose the government’s move to tax its retirement savings.
After the backlash, the government promised to relook the issue and hinted that it may confine the tax only on the interest component. But it reiterated that its intent was not to make revenues out of such a move, but to nudge people to invest a part of their corpus into annuities to ensure access to pension after retirement.
According to government estimates, of the total 3.7 crore EPF subscribers, this tax would have only hit 70 lakh subscribers who earn more than ₹ 15,000 per month.
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