Despite many financial experts having burned the midnight oil at the drafting stage and having spent considerable time in thoroughly cross-checking the final version of the Union Budget FY17, the Centre has been stumped by vociferous opposition to the tax on EPF withdrawal.
Have consultations for Budget
Despite many financial experts having burned the midnight oil at the drafting stage and having spent considerable time in thoroughly cross-checking the final version of the Union Budget FY17, the Centre has been stumped by vociferous opposition to the tax on EPF withdrawal. This shows that exercises such as the Budget need a pragmatic approach and wider consultations prior to drafting and placing it in the public domain. As the impending protests over the proposed EPF taxation loom large, one hopes the government keeps in mind interests of working class and revisits this rather taxing proposal.
R Prabhu Raj, Bengaluru
Apropos of the edit “Where should we invest” (FE, March), though successive budgets have been dynamic and growth-oriented, they seldom promote household savings—and the latest one is no different. While wages and salaries are rising, no matching avenues for savings and investment have been proposed. Consequently, the propensity to save is diminishing and adversely affecting the growth of household savings. The diminishing returns on savings and taxing of the same, coupled with the increasing prices of food articles, medicines and other necessities, are negatively impacting the standard of living of salaried class and pensioners. Saving for the future, social obligations and unforeseen contingencies is becoming difficult. While unscrupulous borrowers are diverting the banks’ funds and investing in assets for speculative purposes and tax evaders are leading luxurious life, the salaried class and pensioners are regularly paying taxes, yet they have not been given adequate incentives to augment their financial security.
VSK Pillai, Kottayam (Kerala)
EPF taxation is warranted
Not surprisingly, there is huge protest from the organised class of employees at all levels about the proposed tax on 60% EPF withdrawal. However, careful and responsible introspection of the scenario makes one conclude that it is not really inappropriate. Of the working population in the country, around 5% belongs to the organised sector and the rest is in the unorganised sector. Amongst the unorganised sector, more than 50% are involved in agriculture-related activity and 30% of the people belong to lower income group. Therefore, tax has implications only for 5% of the national working population. It is certainly appropriate to consider the organised class as comparatively privileged class of the society. Their salary and incomes are constantly increased by pay revisions, allowances are in tune with the cost of living index, etc. By constantly raising demands for pay increase and resorting to coercive steps like strike and going slow in the name of trade union rights, the organised class have good income and they should be considered as belonging to middle or upper middle income group. The ground reality is that chunk of the expenditure of the employers (both government and private) is spent towards salaries and perks for the employees. For example, the recent pay commission would involve an additional expense for the central government of more than R1 lakh crore. All state governments are to increase the salaries and perks for their employees consequent to the pay increase for central government employees. This will amount to several crore of rupees. To the extent that such expenses are incurred by the central and state governments towards payment of salaries and perks to the employees, the money available with the governments to spend for the welfare and progress of 95% of the unorganised class is less. Obviously, organised class reap the benefits at the cost of unorganised class to some extent. It should be further kept in mind that all government employees get pension after retirement which is constantly revised with cost of living index and pay commissions. Further, in the unfortunate event of death of a retired government employee, family pension is also provided. At the time of retirement, if the organised class has to pay tax once on the retirement benefit which will be available to for the betterment of the unorganised working class, who are in deprived and downtrodden condition, it will only amount to “paying the debt” due to the unorganized brethren of the country.