Govt drops plan to tax EPF withdrawals

New Delhi, Mar 8 (Agencies): Finance Minister Arun Jaitley on Tuesday withdrew his Budget proposal to tax withdrawal of savings accumulated in the employees provident fund (EPF) scheme.

”In view of representations received, the government would like to do a comprehensive review of this proposal and therefore I withdraw the proposal,” Jaitley said in a suo motu statement in the Lok Sabha.

Jaitley had got heavy flak for proposing to tax 60 per cent of the accumulated money in a PF account at the time of withdrawal.

The government had later tried to clarify that the tax would apply only to the interest on deposits made from next year, but this had not appeased the opposition.

Jaitley said on Tuesday that the 40 per cent exemption given to subscribers in the National Pension Scheme (NPS) at the time of withdrawal remains.

The government had said that the tax on withdrawals would not be levied if the money is re-invested in annuity schemes.

All parties and trade unions had criticised the bid to tax the salaried man’s nest egg, as well as the government’s attempt to force employees to invest in pension annuity schemes.

Jaitley had said that, while employees should have the choice of where to invest, it was important that the people subscribe to pension schemes to protect themselves.

“In the present form, the policy objective is not to get more revenue but to encourage people to join the pension scheme,” Jaitley had said explaining the rationale for the taxation proposal.

The proposal would not have impacted 3.26 crore subscribers to the EPF drawing statutory wage of up to Rs 15,000 per month.

The EPF Organisation has 3.7 crore subscribers.