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In his budget speech on Monday, 29th February, Arun Jaitley had proposed to tax 60% of the EPF corpus that were created after April 1, 2016. However this proposal didn’t get down too well with the salaried class of the country. 
 
However, the people who have just entered the EPF will be the worst affected because of this proposal. Even if the government plans to tweak the rule and tax not the entire principal but only the interest portion, even then a major portion of the EPF savings would be gone to the government as tax. 
 
On the other hand, subscribers who believe in invest and forget don’t have anything to worry about since the new rule will not apply to PF balance accumulated till April 2016 and the interest it earns thereafter. 
 
The fact that this budget is so ambiguous has made the salaried class angry and frustrated with the direct attack on their life savings. Even though last year's Budget had talked about the need to allow EPF subscribers to migrate to the NPS, but no steps were taken to facilitate that migration last year or in this budget. 
 
<a href="http://static.abplive.in/wp-content/uploads/2015/12/17160500/Arun-Jaitley-PTI.jpg">Image source</a>

Budget 2016 leaves young EPF subscribers helpless

After facing major backlash over bringing the EPF under the <a href="http://www.businessinsider.in/searchresult.cms?query=tax">tax net</a>, <a href="http://www.businessinsider.in/searchresult.cms?query=arun+jaitley">Finance Minister Arun Jaitley</a> finally roll-backed the proposal of taxing the withdrawal of over 40% of the <a href="http://www.businessinsider.in/searchresult.cms?query=EPF">Employees' Provident Fund</a> (EPF). 
 
The common man was unhappy after Jaitley, in his <a href="http://www.businessinsider.in/searchresult.cms?query=budget+2016">Budget 2016-17</a>, had announced tax on lump-sum withdrawals, which dented the plans of pensioners. 
 
Now, the EPF has become fully tax-free, a huge relief to salaried workers. 
 
People who had just entered the EPF would have been the worst affected because of this proposal. 
 
Currently, a company can contribute up to 12% of the basic component of someone's salary as EPF. 
 
(Image: Indiatimes)

Gone. Arun Jaitley withdraws the unpopular EPF
taxation proposal!

Facing sharp criticism over bringing employee provident fund withdrawals under tax net, Finance Minister <keyword id="42575" type="PERSON" weightage="20" keywordseo="Arun-Jaitley">Arun Jaitley</keyword> 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)

Govt
rethinking its decision to tax interest on EPF

After <a href="http://www.businessinsider.in/searchresult.cms?query=rahul+gandhi">Congress vice-president Rahul Gandhi</a> took credit of rollback of proposal to <a href="http://www.businessinsider.in/searchresult.cms?query=EPF">tax EPF withdrawal</a> saying that his pressure worked, the BJP mocked his claim. 
 
<a href="http://www.businessinsider.in/searchresult.cms?query=arun+jaitley">Finance Minister Arun Jaitley</a> withdrew his proposal to bring EPF under the tax net. To this, the Nehru-Gandhi scion said, “"My pressure worked... I had warned the government against suppressing salaried class. I felt middle-class people were being hurt by the government, so I decided to put some pressure. Happy that they have got some relief.” 
 After his claims, the BJP minister came in attack mode. Parliamentary Affairs Minister <keyword id="74369" type="PERSON" weightage="20" keywordseo="Venkaiah-Naidu">Venkaiah Naidu</keyword> said <keyword id="5268" type="PERSON" weightage="20" keywordseo="Rahul-Gandhi">Rahul Gandhi</keyword> was hurting the poor by blocking important legislations in Parliament. 
 
Jaitley also hit out at the Congress, saying the party did nothing for social security for people when it was in power. 
 
Also, the BJP said the Congress and Rahul Gandhi can take credit for all decisions. “He can take credit for the passage of <a href="http://www.businessinsider.in/searchresult.cms?query=GST+bill">GST</a> and other bills if he lets Parliament function and helps the government in the passage of the bills. These are not the bills of BJP but of the country,” the BJP said. 
 
(Image: Indiatimes)

BJP mocks Rahul Gandhi’s claim of pressuring govt to withdraw tax on EPF, says pass GST and take credit for it too

Finance Minister <keyword id="42575" type="PERSON" weightage="20" keywordseo="Arun-Jaitley">Arun Jaitley</keyword>’s decision to tax the interest earned on 60% of your Employee Provident Fund (<keyword id="45027" type="ORGANIZATION" weightage="20" keywordseo="EPF">EPF</keyword>), when withdrawing before maturity, will burn a hole in both your heart and pocket. While his intention was to earn more revenues for the government’s big ticket social schemes, it hasn’t really gone down well with the salaried class, who have traditionally seen the EPF as a safe source of investing their hard earned money, for a very stable interest-earned regime. 
	 
	Currently, a company can contribute up to 12% of the basic component of someone’s salary as EPF. 
	 
	Still scratching your heads to figure how this new announcement will hit your safe savings? Allow us to explain! 
	 
	Let’s say you earn Rs 2.5 lakh as salary annually, it would mean your in-hand-monthly income would be roughly around Rs 20,000, which would include components such as Basic, HRA, Transport and Special Allowance. Assuming that your basic salary is Rs 11,000, basis how you’ve negotiated your salary structure with your employee, the EPF contribution then would amount to Rs 1,320. As per the new policy, interest earned on 60% of this amount, which is roughly around 8.8% interest on their EPF contribution. It means that the the government will levy tax on the interest levied on Rs792 . So, in the case you have quit the company and want to withdraw your EPF, the government will now tax the interest received on the contribution, 
	 
	Similarly, for an employee with an annual package Rs 5 lakh, the monthly salary is a little over Rs 41,000. If we assume that the basic salary is Rs 15,000, the monthly EPF contribution would be Rs 1800. The monthly interest received on 60% of the Rs1,080 amounts to Rs 95 at 8.8% rate of interest. 
	 
	For an individual earning Rs 10 lakh, the monthly salary is Rs 83,000. The basic component is assumed to be Rs 30,000 and the EPF contribution amounts to Rs3,600. The interest received on 60% of this saving i.e. Rs 2,160, is taxable. 
	 
	Well, it seems the government will be able to churn out huge revenues in FY17 by taxing the EPF. Won’t be surprised if the NaMo government once again meets its revenue target in 2016 as well. But we feel your pain!

Withdrawing your EPF? We tell
you how your savings will take a hit

While presenting his third budget, Finance Minister Arun Jaitley did not change the tax slabs to bring more and more people under the tax net. 
 
Jaitley said the role of tax payers was important in nation building and each rupee contributed to sectors such as infrastructure, rural and social well being. 
 
The net revenue gain of Rs 19,610 crore was due to surplus from indirect taxes. 
 
He also announced a little relief for professionals and people staying in rented accommodations. 
 
He categorised taxation under 9 disciplines 
 
1. Tax relief to small tax payers: 
 
Jaitley announced relied for people staying in rented accommodation. The compensation in rent increased from Rs 24, 000 to Rs 60, 000 per anuum 
Presumptive income tax scheme to be extended to all professionals with income of Rs 50 lakh with presumption of 50% profit 
2.Boost employment and growth: 
 
Deduction in taxes under Skill Development by 2020 10% extra DDT on dividend recipients earning above Rs 10 lakh per annum, says FM in <keyword id="2783177" type="UNKNOWN" weightage="20" keywordseo="Budget-2016">Budget 2016</keyword> 
100% tax deductions for new startups for first 3 years 
More asset reconstruction companies 
Residency of foreign companies deferred by one year 
Exempt service tax on general insurance service under Nirmaya scheme 
Basic custom duty hiked 5%-6% 
3.Incentivise domestic value and make in India: 
 
4. Pension society: 
EPF: 40% corpus to be tax free 
Annuity income will be non-taxable 
Monetary limit 1.5 lakh per annum 
Government to introduce bill to amend Companies Act for ease of doing business; to enable registration of companies in a day 
 
Affordable housing: PM Awas Yojana to be strengthened 
100% deduction for undertaking flat of 30 sq metre, however, MAT will apply 
First home buyers: deduction for add 50,000 per annum to 35 lakh loans during next fiscal under Rs 50 lakh 
Investment in real estate: 
Exempt service tax on affordable housing 60 sq meet 
 
Add resource to more on farm, clean: 
 
Tax 10% at gross amount of dividend will be apd 10lkh/annum 
Raise surcharge 12% to 15% 
Purchase of luxury cars 
Levy infrastructure cess 1% LPG 2.5 diesel, 4% on high engine capacity and SUVs 
Branded excise duty above Rs 1, 000 goes up 6%-12.5% 
Hike in excise duty by 10-15% tobacco other than bidis 
Krishi Kalyan Cess of 0.5% on all taxable services: FM 
Clean Energy Cess to renamed as Clean Environment Cess 
 
Reducing litigation 
Tax evasion to be strengthened 
Jaitley came down heavily on black money 
3 lakh tax cases pending amounting to Rs 5.5 lakh crore. New dispute resolution scheme to settle case by paying disputed case interest. 
Levy of heavy penalty for non payment of tax has led to high litigation. Proposal to modify scheme for penalties 
 
Simplified taxation 
 
To reduce multiplicity of taxes and cascading - 13 taxes with collection less than Rs. 50 Crores a year abolished. 
Use of technology for accountability 
Income tax dept. will expand e-sahyog to assist small taxpayers 
Plan to use technology in Taxation department in a big way

Great news for the common man, no change in tax slabs but cess and excise duty hiked on several products

There were several key messages from the budget this year, but the three which seem to stand out are in the areas of boosting infrastructure growth, reinvigorating rural demand and the rebooting financial sector. 
 
For boosting infrastructure, the roads sector is given an unprecedented Rs 97,000 crore of investment allocated in this year's budget. It is expected to have a multiplier effect on the economy in the coming years and help in efficient transportation. This along with the Rs 1.21 lakh crore CAPEX in railways seems to be a major thrust of the union government going ahead. 
 
The government is expected to approve 10,000 km of National Highways in Fiscal 2016-17 apart from the plan to upgrade 50,000 Km of state highways to national highways. 
 
Apart from this, the move to develop airstrips of AAI in some of the towns in India is another positive step concerning infrastructure. Similarly, the plan to reinvigorate PPPs in infrastructure is also a positive one which may help private sector step in for some investment. 
 
Second, for reinvigorating rural demand two related sectors have been targeted. One is the agriculture sector which has seen two back to back seasons of scanty rainfall. For the farmers in the sector, the announcement of a Fasal Bima Yojana will provide relief. And so will the move to create irrigation infrastructure through the strengthening of the Pradhan Mantri Krishi Sinchai Yojana over the long term. 
 The creation of the e-platform for farmers to sell their produce in wholesale markets across the country will aid in more freedom to the farmers to sell their produce. The change in the APMC Act in 12 states about the same is a progressive step. For the rural sector, which is the second sector, the structural step to give more funds to Panchayats and Municipalities (Rs 2.87 lakh crore) as per the recommendations of the Fourteenth <keyword id="74136" type="ORGANIZATION" weightage="20" keywordseo="finance-commission">Finance Commission</keyword> is taken. It is an appropriate step as it will lead to a massive devolution of funds to the third tier of governance. Similarly, the steps for development of urban clusters for market access and job generation will aid in strengthening the rural economy in the long term. The substantial allocations to MGNREGS (Rs 38500 crore) and the rural sector overall (Rs 87,765 crore) underlie the impetus that is being given to rural economy and demand in the sector. 
 
Third, another major focus area for the budget has been addressing the challenges of the financial sector. The introduction of the comprehensive Code on Resolution of Financial Firms in Parliament, as well as the code on Bankruptcy when enacted, will help in resolution as well as help bring in more accountability in the financial system. Also, the PSU banks have been facing problems due to asset quality and rising NPA. 
 
In addition to the comprehensive INDRADHANUSH already being implemented, the budget has done well to provide an allocation of Rs 25,000 crore for the recapitalisation of PSU banks. Also, the motivation to solve people's problem at the retail level are worth mentioning. These include the intent to tackling the issue of illicit deposit taking schemes as well as the intent to provide better access to financial services in rural areas through the rollout of ATM's and Micro ATM's over the next three years. 
 
Apart from these broader sectors other things where the government has done well at the macro level include sticking to the fiscal deficit target of 3.9 percent and 3.5 percent for the years 2015-16 (R) and 2016-17 (B) respectively. 
 
The government has also announced a committee to look into the FRBM Act, 2003 which is a good thing considering that market conditions in India are different than they used to be in the past. On the personal tax front, not much is seen for the middle class and the EPF taxation seems to be a negative move that has seen some visible backlash on social media. Another negative on the personal front seems to be on duties on several items where almost everything seems to get expensive from jewellery to cars to mobile phones to air travel. The only thing that is getting cheaper it seems are shoes and footwear. All in all the budget seems to be good for the rural economy and infrastructure sector and seems to take care of the financial sector problems at hand but leaves much to done for the middle class. 
 
 
(The article is co-authored with Sankalp Sharma, Senior Researcher at the Institute for Competitiveness, India. Amit Kapoor is Chair, Institute for Competitiveness &amp; Editor of Thinkers. The views expressed are personal. Amit can be reached at <a href="mailto:amit.kapoor@competitiveness.in">amit.kapoor@competitiveness.in</a> and tweets @kautiliya)

Three key things that standout from other measures in Budget 2016

With <keyword id="35050" type="CITY" weightage="20" keywordseo="gdp">GDP</keyword> growth of 7.3%, in 2014-15, India’s economy is firmly on the path of economic revival. India is the brightest spot on the global map, with GDP Growth expected to rise to 7.9% in 2017-18. India is well positioned to withstand near-term global headwinds and the high volatility in global financial markets due to reduced external vulnerabilities, a strengthening domestic business and investment cycle, and a supportive policy environment. Most recently, even the IMF has maintained its GDP growth projection of 7.3% in 2015-16 and 7.5% in 2016-17, even as it cut projections for overall global output. 
	 The transition from a state of crisis of confidence in 2013 to a bright spot in 2015 is not by chance but by design. The past few months in particular, have seen even renewed energy from the Government to enforce key reforms, and revive industrial sentiment. Going forward, the upcoming Budget Session of <keyword id="6354721" type="ORGANIZATION" weightage="20" keywordseo="parliament">Parliament</keyword> will be very important in the current scheme of things, to create short &amp; medium term wins. 
	 
	Boosting Savings in India 
	 
	Most importantly, there is a need to boost savings in the economy to enhance the inherent economic strength of the financial sector. It will be worthwhile to adopt of the structural GEAR (Growth, Efficiency, Attractiveness, Reach) approach, as elaborated below, to augment the savings rate in the economy: 
	 
	Enhance economic growth to increase per capita incomes: Towards this end, it will be important to increase disposable incomes by relaxing personal income tax slabs to INR 5 lakh from the current level of INR 2.5 lakh – this could be a one-time correction and this could thereafter be linked to inflation and reviewed every three years. This will provide an immediate thrust to household incomes, part of which will be diverted to financial savings. 
	 
	Focus on efficiency in financial transactions: Use of plastic currency and e-transactions (via internet/mobile) will not only improve ease of transactions but also enhance saving propensity among citizens. Every 1% reduction in currency in circulation is likely to add 0.4% to the savings rate. More importantly, this could also help in curbing the flow of black money. 
	 
	Make financial savings attractive: Financial savings must be promoted by improving tax incentives. One of the enabling measures for this will be to enhance 80C limits to INR 3,00,000 from current level of INR 1,50,000 – this will also deepen the mutual fund and equity markets. Secondly there is a need to increase inflation adjusted post tax returns for bank deposits, by reducing lock in period eligible for tax rebate to 1 year from 5 years; and enhancing the threshold for mandatory TDS on interest income to INR 50,000 a year from the current level of INR 10,000. It will also be useful to roll back TDS on Recurring Deposits to encourage wider adoption, as this is a product that promotes the habit of regular saving. Further, pension products like EPF and PPF continue to enjoy ‘EEE’ tax status whereas the National Pension Scheme (NPS) are subject to ‘EET’, which involves tax obligation at the withdrawal stage. To create a level playing field and prevent cannibalization, NPS needs to get ‘EEE’ tax status to make it more attractive. 
	 
	Expand financial reach: The Government could consider converting India Post into Postal Bank of India, a full-fledged Payments and SAVINGS bank, to leverage its rural penetration for greater financial inclusion. Internationally, there are a few countries which have tapped the postal institution for extending financial inclusion. 
	 
	Next Generation of Reforms 
	 
	For 2016, I believe India’s top priorities should include passage of GST, rationalizing direct taxes further, tax sops for Start Ups and introducing key structural reforms in terms of real estate, labor and MSMEs. The farm sector too needs significant focus on irrigation and technological support. 
	 
	With the global economy expected to remain mired in volatility in 2016, strengthening the domestic economy will also help to ring-fence India against global headwinds. While micro measures will help, the Banking &amp; Finance sector also needs the next generation of reforms. I am hopeful that economic clairvoyance will triumph over political myopia in 2016 and GST will see the light of the day. The Bankruptcy Bill will also turn out to be a game changer for spurring economic activity and confidence. This Budget presents a Golden Chance to usher in Fiscal Measures to make 2016 India’s Year. 
	 
	The article has been authored by Rana Kapoor, managing director and CEO of YES Bank and chairman of YES Institute.

You Searched For "EPF budget 2016" and got 8 results

Budget 2016 leaves young EPF subscribers helpless

BI India Bureau

Gone. Arun Jaitley withdraws the unpopular EPF taxation proposal!

BI India Bureau

Govt rethinking its decision to tax interest on EPF

BI India Bureau

BJP mocks Rahul Gandhi’s claim of pressuring govt to withdraw tax on EPF, says pass GST and take credit for it too

BI India Bureau

Withdrawing your EPF? We tell you how your savings will take a hit

Purba Das

Great news for the common man, no change in tax slabs but cess and excise duty hiked on several products

BI India Bureau

Three key things that standout from other measures in Budget 2016

India Council on Competitiven…

Here’s what one of the largest private bank, YES Bank has to say about Budget 2016

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