Govt Finally Rolls Back EPF Tax Proposal, Rahul Gandhi Gloats

However, the tax proposal for National Pension system (NPS) scheme has been retained, Jaitley has said.

In response to the intense backlash from salaried taxpayers, Finance Minister Arun Jaitley rolled back the proposed tax on withdrawals from the Employees’ Provident Fund (EPF). The move will be further reviewed by the Finance Ministry.

The announcement was made in the Lok Sabha a day after the prime minister himself reportedly asked for the proposal to be reconsidered. 

The main argument is that employees should have a choice of where to invest or not. The idea is to make people join pension schemes.  

Arun Jaitley, Finance Minister

However, the tax proposal for the National Pension System (NPS) scheme has been retained, Jaitley has said.

Taking credit for the rollback, Congress Vice President Rahul Gandhi said it was his pressure on the government that finally bore results.

Finally the Govt was forced to listen to people and roll back the patently unfair tax on EPF (1/2)

— Office of RG (@OfficeOfRG) March 8, 2016

But the attempt to tax the safety net of millions of hard working middle class ppl was morally wrong&shows this Govt's anti-ppl mindset(2/2)

— Office of RG (@OfficeOfRG) March 8, 2016

Earlier, following intense backlash, the government had indicated that a rollback was likely. In the Budget on 29 February, the government had proposed that 40 percent of the total corpus withdrawn at the time of retirement be tax-exempt, both under EPF and NPS. This meant that the remaining 60 percent of the EPF’s incremental corpus from fiscal year 2017 taxable unless the amount was invested in an annuity product.

This prompted the salaried classes to oppose the government’s move to tax its retirement savings.

After the backlash, the government promised to relook the issue and hinted that it may confine the tax to only the interest component.

According to government estimates, of the total 37 million EPF subscribers, this tax would have only hit 4.5 million subscribers who earn more than Rs.15,000 per month.