Amid mounting opposition from labour unions and the salaried class, the government on Tuesday withdrew the controversial budget proposal to tax provident fund withdrawals.
Finance minister Arun Jaitley informed the Lok Sabha on Tuesday that the proposal to tax withdrawals from employees’ provident fund (EPF) accounts stand withdrawn.
The government will undertake a “comprehensive review” of the proposal in wake of the large number of representations it has received from various stakeholders, Jaitley said.
In the budget presented by finance minister Arun Jaitley on February 29, the government had announced that 40% of an individual’s accumulated corpus in EPF and National Pension System (NPS) schemes would not be taxed at the time of withdrawal.
This was taken to mean that the remaining 60% of the EPF corpus was taxable.
On Tuesday, the finance minister said that the proposal to keep 40% of withdrawals from the NPS accounts stays unchanged.
Withdrawal from EPF is entirely tax-free and the budget proposal had triggered howls of protest from EPF subscribers and labour unions that have termed it as anti-worker.
A day after the budget, the government had hinted that it was open to modify the rule to tax only the interest earned on 60% of the EPF contributions made after April 1, 2016.
EPF is India’s biggest social security scheme with 60 million workers depending on it for post-retirement savings.
Trade unions, including the RSS affiliated Bharatiya Majdoor Sangh (BMS), had slammed the government’s move to tax provident fund withdrawals.
