1. Confusion on EPF due to bad phrasing in Budget speech: Hasmukh Adhia

Confusion on EPF due to bad phrasing in Budget speech: Hasmukh Adhia

Union revenue secretary Hasmukh Adhia today defended the proposal to tax Employee's Provident Fund withdrawals, saying the intention was only to encourage investment in pension schemes, but the phrasing in the Budget speech caused the confusion.

By: | Ahmedabad | Published: March 5, 2016 10:48 PM
 Union revenue secretary Hasmukh Adhia argued the government has in fact continued with the policy of exempting EPF at all three stages (entry, during the scheme and exit). (PTI) Union revenue secretary Hasmukh Adhia argued the government has in fact continued with the policy of exempting EPF at all three stages (entry, during the scheme and exit). (PTI)

Union revenue secretary Hasmukh Adhia today defended the proposal to tax Employee’s Provident Fund withdrawals, saying the intention was only to encourage investment in pension schemes, but the phrasing in the Budget speech caused the confusion.

“The entire thing happened not because of any illogicality in the step but due to the communication gap,” Adhia said at an interaction on Budget at the Ahmedabad Management Association here.

“In the budget we try to concise the speech by minimising the words. If it goes beyond 1 hour and 30 minutes it becomes boring. When we were reducing the number of words and when it came to this paragraph we chopped it off and that is how the problem occurred,” Adhia said.

“If we had paraphrased this paragraph differently then less confusion would have been created.”

The government has in fact continued with the policy of exempting EPF at all three stages (entry, during the scheme and exit), he argued.

“We have not said that we will be taxing remaining 60 per cent (of withdrawn EPF). The first 40 per cent is totally exempt. Regarding remaining 60 per cent the expectation is you should put it in some pension scheme….To encourage people to put their money in pension products we have said if you put the remaining 60 per cent in annuity scheme it will not be taxed….original corpus after your death will go to your heir and that will also be tax exempt,” he said.

“So in a way we have continued exempt, exempt, exempt scheme, but with a time period,” he said.

“We do not wish to get anything out of this, it is not a revenue mobilisation effort,” Adiha said.

“The Finance Minister has already said that he will make the announcement on it in a very short time (in Parliament)”, he noted.

The government could not raise the Income Tax exemption limit as when it was raised the last time from Rs 2 lakh to 2.5 lakh, it lost some 40 lakh tax payers, he said to another question.

  1. I
    indira
    Mar 6, 2016 at 7:06 am
    Sir, I cannot agree with you. If we read the Economic Survey with Budget Speech it is very clear. Economic survey had terms EPF/PPF as some sort of subsidy given by govt. And why TAX on EPF and no TAX on GPF, Mutual Funds after one year, ELSS, PPF and Insurance polity. All these along with EPF are also allowed exemption under Section 80C. EPFO has the composite benefit of 1) Lump sum amount in the form of PF which the employee can use for his immediate needs after retirement 2) Pension till death or widow Children Pension even if employee dies after one months service. Although the pension may be less it ensures r a life with dignity after retirement. The employee is always free to invest in other Pension Plan according to his requirement as a topup. What EPS Pension does is give you a minimum Social Security. 3) Insurance upto Rs 6 Lac. When all these are available with EPFO, the employee should not be forced towards NPS or Annuity Plans. The triple benefit provided by EPFO is not available in NPS. Govt instead of trying to destroy EPF to promote NPS and Annuity Plans should promote Universal pension by strengthening EPF/EPS. All employees irrespective of their ry should contribute by restricting ry to Rs 15000. In other words if employee has a ry of Rs 50,000 he should contribute on Rs 15000. The other should to be left to the wisdom of the employee. It is not the duty of the Govt to monitor what type of Rice an employee eats. Also consider this Year 2004- NPS introduced , 2014 - Govt stops pension to employees with initial Pay > Rs 15000, 2015 - Govt tax premature withdrawal for employees with less than 5 years of service and also announced tax exemption of Rs 50,000 invested over and above Rs 1,50,000 available under Section 8-0C.. In-spite of doing all these the almighty Finance Ministry is unable to attract investment in his pet project NPS. All these drama are just a ploy to force people to NPS. The Finance Minstry should have just said that their aim is to destroy/abolish EPF which has stood the taste of time for the last 70 years and promote a non starter called NPS.
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