Faced with widespread criticism, Finance Minister Arun Jaitley on Tuesday withdrew the controversial EPF taxation proposal. He, however, said that 40 per cent exemption given to National Pension Scheme (NPS) subscribers at the time of withdrawal will remain.
He further added that a comprehensive review of the EPF tax proposal will be taken by the government.
Jaitley in his Budget for 2016-17 had proposed to tax withdrawal of 60 per cent of accumulations in the employee provident fund after April 1, 2016, unless the amount was used to purchase annuities.
“In view of representations received, the government would like to do a comprehensive review of this proposal and therefore I withdraw the proposal,” Jaitley said in a suo motu statement in Lok Sabha.
“Employees should have the choice of where to invest. Theoretically such freedom is desirable, but it is important the government to achieve policy objective by instrumentality of taxation. In the present form, the policy objective is not to get more revenue but to encourage people to join the pension scheme,” Jaitley said explaining the rationale for the taxation proposal.