Cutting across party lines, central trade unions (CTUs) on Monday threatened to resort to countrywide protests unless the proposal to tax provident fund withdrawals, if not invested in annuity, was completely withdrawn.
“There is neither any necessity nor any justification for the government to tax on EPF withdrawals. We want complete roll back of the proposal, nothing less, nothing more,” Bhartiya Mazdoor Sangh’s (BMS) general secretary Brijesh Upadhyay told FE. BMS, the largest CTU now in the country, is affiliated to RSS.
CITU’s A K Padmanabhan and AITUC’s D L Sachdeva echoed the same view. While Sachdeva said, “We want complete roll back. We don’t want anything less than that. We won’t any compromise”, Padmanabhan said the finance ministry’s proposal is akin to double taxation for some and should be “completely withdrawn.”
Stoking controversy and protests all across the country, particularly among the salaried middle class, finance minister Arun Jaitley had in the Budget proposed to impose tax at the time of withdrawal on 60% of the accumulated sum attributable to contributions by the employees made after April 1, 2016, provided the amount is not invested in annuity products. Also, the employer’s contribution was proposed to be capped at Rs 1.5 lakh a year. The finance minister is likely to make a statement in Parliament on Tuesday.
The social security scheme run by retirement fund body EPFO does not attract tax on deposits, accruals of interest and withdrawals. The proposal to keep those out of the tax net earning less than Rs 15,000 per month would impact only 70 lakhs out of the 3.7 lakh subscribers, according to the government’s estimates.
Trade union leaders said the labour ministry never had consultation with them after the proposal was out, nor they have received any communication or assurance of roll back. However, leaders said EPF issue has also been incorporated as an agenda in their scheduled protest on March 10 against government indifference to the already 12-point charter of demands.
“We want to see what the finance minister says on the PF issue and if not satisfied, we will also hold a consultation meeting among the CTUs on March 16 to decide our charter of actions against the EPF tax proposal,” Sachdeva said.
FM likely to tweak EPF tax proposal today
Finance minister Arun Jaitley will likely modify the controversial Budget proposal to change the tax treatment of Employees’ Provident Fund (EPF) in Parliament on Tuesday. This follows an advice by the prime minister. While the BJP, along with the Congress and Left parties, has demanded that the proposal be withdrawn completely, Jaitley has three options: complete withdrawal or deferment of the Budget proposal, making the tax applicable only on accumulated returns and restricting the tax to only new accounts to be opened from April 1.
EEE status for EPF; investments up to Rs 1.5 lakh eligible for tax breaks under section 80C; EET treatment for NPS, additional Rs 50,000 annual tax exemption
NPS withdrawal up to 40% of the accumulated balance to be tax-free.
EEE regime to continue for 3 crore EPF subscribers below the statutory wage limit of R15,000 a month; However, in case of the remaining 70 lakh subscribers, while 40% of the accumulated balance attributable to employee contributions after April 1, 2016 will be tax-free, the balance 60% of such contribution will be taxed; employer’s contribution will continue to be tax-free but will be capped at R1.5 lakh/year; EEE if invested in annuity products
Options before the FM
Complete withdrawal/ deferment of the budget proposals on EPF
Making the tax applicable only on accumulated returns (interest)
Restricting the tax to only new accounts to be opened from April 1