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Facing flak for proposing a tax on employee provident fund withdrawals, Finance Minister Arun Jaitley on Wednesday said he will spell out the final decision on the matter when he replies to the debate on Budget in Parliament.
After Budget 2016-17 proposed taxing 60 percent of the withdrawal from Employee Provident Fund (EPF) on contributions to be made after 1 April, the government on Tuesday hinted at a partial rollback.
At a meeting organised by industry chambers on Budget provisions, Jaitley said the move was aimed at high-salaried class and not the overwhelming section of 3.7 crore EPF members.
The intention behind the move is to make India a more insured and pensioned society as the Budget provision provides for no tax on EPF withdrawal if it is invested in pension-based annuities.
With the proposal being attacked by various employees unions including RSS-backed BMS and political parties who termed it as “an attack on the working class and a clear case of double taxation,” the government earlier said it was to limit the tax only to the interest accrued.
“Now there has been some reactions. When the debate comes up in Parliament I will give the government’s response as to what decision we finally take in this matter,” he said.
Jaitley said the objective behind the proposal was that no tax is levied on 40 percent of the withdrawal which can be used for meeting retirement commitments. The balance, he said, can be converted into annuity and the person would get a regular pension and he does not pay tax.
“There is also a change in the law that when inheritance comes in there is no tax payable,” he said. “This was intended to incentivise people in the private sector also to use it as a kind of pension fund and to disincentive those who otherwise would indulge in consumption of that fund this move was made.”
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