EPF Tax in Budget 2016: Pros and cons of Arun Jaitley’s EPF tax on withdrawal proposal
EPF Tax Budget 2016: FM Arun Jaitley did not make too many waves in the public sphere with most of his presentation in Parliament, but as soon as employees realised that the Narendra Modi government was looking at taxing their retirment savings, the reaction was instant and extremely furious. After all, they could see their hard earned money disappearing into the government treasury. While the governemnt has been pushed on the back foot by the protests, there are always 2 ways of looking at most points. Here we provide the pros and cons of Arun Jaitley's Budget 2016:
EPF Tax Budget 2016: ARGUMENTS IN FAVOUR OF THE TAX - 1. The government says it will bring parity among provident fund, pension funds and the National Pension System (NPS). Experts say that this will allow investors to choose a product based on the returns they generate and the risk exposure they carry, and not on the basis of the tax benefit they offer.
5. "In terms of growth rates, the gross national income is estimated to have risen by 7.5 per cent during 2015-16, in comparison to the growth rate of 7.3 per cent in 2014-15."
4. Arun Jaitley: You use extended period to allure, bribe. All these are breach of the Constitution.
EPF Tax Budget 2016: ARGUMENTS AGAINST THE TAX - 1. The first argument is that while the government is continuing with the EEE tax benefit for equity linked savings schemes by mutual funds and unit linked insurance plans where middle and large income investors invest, it is proposing to remove EEE benefit from EPF, where the majority of contributors are assumed to be in the low income bracket.
EPF Tax Budget 2016: ARGUMENTS AGAINST THE TAX - 2. EPFO is the only retirement saving for workers in the low income group, and an imposition of tax at the time of withdrawal will rob them of a sizeable portion of their long-term savings.
EPF Tax Budget 2016: ARGUMENTS AGAINST THE TAX - 3. Some argue that since the contribution to EPF goes from tax-paid income, if the government imposes tax at the time of withdrawal, it will be like taxing them twice on the same income.
The limits for TDS deduction in Budget 2016 have also been raised in case of payments to contractors from Rs 75,000 to Rs 1 lakh, commission or brokerages (from Rs 5,000 to Rs 15,000), commission on lottery ticket (from Rs 1,000 to Rs 15,000) and on acquisition of immovable property (from Rs 2 lakh to Rs 2.5 lakh).
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ANALYSIS / EXPERT COMMENTS
- Meghnad Desai
India needs a body like the UK’s Office of Budget Responsibility
- Anita Rastogi
In addition to simplifying the taxation structure, implementation of the GST regime will help eliminate most indirect tax issues
- Nirvikar Singh
Repressive regimes fail to deliver inclusive and substantive economic growth
- Anwar Shirpurwala
Extend duty incentives for mobile phones and tablets to all Information Technology Agreement goods
- Eric Mehta
Will this Budget be an enabler for ‘Make in India’, ‘Make for India’ and, most importantly, ‘Make India’ is something that will soon be answered