Jaitley to clarify on PF taxation issue during reply to Budget debate
02 March 2016
Finance minister Arun Jaitley today said the government is seized of the widespread concerns over the issue of taxing employees provident fund (EPF) and that he will address this issue during the reply on Budget debate.
In a bid to dispel fears of the salaried class ahead of state elections, Jaitley further said that the intention of the government is not to increase revenue only but to ensure welfare of the society as well.
"As far as EPFO is concerned, the intention is not for revenue raising but making India a pension and ensured society."
Yet, Jaitley did not say that he proposed to break away from the long-held practice of exemption at all stages.
Jaitley's Budget for 2016-17 sought to impose a retirement tax at the time of final withdrawal on 60 per cent of contributions made after 1 April 2016 to EPF and other retirement funds.
The government has so far failed to come clear on the taxation proposal, although it said that private employees can place 60 per cent of investment under annuity for which they will be exempted from tax, and that only the interest component will be taxable.
Jaitely's budget proposal to tax 60 per cent of a retiree's EPF savings could be a politically disastrous move for the BJP but the finance minister found it a more convenient and workable solution to government's revenue shortages than penalising the black money holder.
But, the amnesty scheme for unaccounted income and double taxation on lifetime savings of a workman contradicts the government's pro-poor claims and would tell on the Modi government's future prospects.