EPF tax rollback: The government rolled back the proposal to tax EPF withdrawals as it realised that concerns raised by lots of people are very legitimate, Minister of State for Finance Jayant Sinha said today. “… we realised that other than looking at something that would guide people towards retirement income, it actually resulted in situation where lots of people felt 60 per cent of the corpus of EPF that was restricted in terms of withdrawal was taking flexibility away from their own retirement plan which was a very legitimate concern that has come up,” Sinha said at an event organised by industry body FICCI.
Jayant Sinha said that the objective of the proposal was to provide “further benefits to salaried class as far as pension was concerned”.
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.
In the Budget for 2016-17, Finance Minister Arun 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 Minister further said that government wants to work for the people who are saving for their retirement.
“I want to assure, every one who is saving for retirement that government is on your side, government wants to work with you, and it wants to provide you incentives and the opportunities… that’s why we have modified EPF now.”
The minister said the objective of proposal to tax EPF at time of withdrawal was to strengthen the pension system in this country and bring EPF and NPS on par so that our salaried class that were saving for retirement would be able to make a choice between two schemes independent of their tax structure.
“The objective of proposal to tax the employees’ provident fund (EPF) at the time of withdrawals was never ever to raise tax revenues,” he said.
Sinha said the Budget seeks to rejuvenate the rural economy, reform public sector banks, transform the tax ecosystem, massively increase public investment and upgrade the social security system.
He noted that the Budget achieved a fine balance between ‘Bharat’, the informal rural economy, and India, between fiscal rectitude and economic growth imperatives and between good politics and good economics.
“Much more is to come, he said, such as the GST, the Bankruptcy Code, real estate reform, affordable housing and building of smart cities,” the Minister said.
Elaborating further, he said that the key features of the budget proposal are to build infrastructure through public investment, a robust financial system, transparent and predictable tax regime, cooperative federalism and governance reforms.