Govt rethinking its decision to tax interest on EPF

Facing sharp criticism over bringing employee provident fund withdrawals under tax net, Finance Minister Arun Jaitley is mulling over a partial rollback.

Jaitley said he will announce the final decision on the matter during Budget debate in the Parliament.

While announcing the Budget 2016-17, Jaitley proposed taxing 60 per cent of the withdrawal from Employee Provident Fund (EPF) on contributions to be made after April 1.

The decision attracted criticism and many petitions against the same.

In his clarification, Jaitley said the move was aimed at high-salaried class and not the overwhelming section of 3.7 crore EPF members.

"The revenue department had considered various aspects of the National Pension Scheme and Employee Provident Fund Organisation (EPFO). Their intention is not revenue raising, that was not the principal intention," he said.

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 yesterday 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 per cent of the withdrawal which can be used for meeting retirement commitments.

(Image: Indiatimes)