The budget proposal of making sixty percent of Employee Provident Fund (EPF) taxable has been rollback by the Modi government. Arun Jaitley announced it in the Lok Sabha on Tuesday. After the constant pressure from the opposition, the government gave the signal of rollback.
Rollback by Modi Government, EPF wouldn’t be taxable at all, Arun Jaitley takes back proposal
Arun Jaitley on 29th of February announced in his speech that after 1st April, 2016, the forty percent of the contribution to Employee Provident Fund would not be taxable. That implied that the sixty percent remaining would be taxable.
Actions Taken for EPF Tax Rollback
On 1st March 2016, Bharatiya Mazdoor Sangh and other worker unions opposed the proposal of the tax on E.P.F. There is still some confusion after the statements from government’s revenue secretary and Jayant Sinha. On next day i.e. 2nd March 2016, Labour and Employment Minister Bandaru Dattatreya in Rajya Sabha said that government is talking with all the sides. On 6th March, PM Narendra Modi arranged a high-level meeting in the PMO and asked Arun Jaitely to roll back the decision of tax imposed on EPF.
Rahul Gandhi consistently targeting the Modi government over EPF Tax
Why Rollback on tax on EPF?
There is an election coming up in five states which are Kerala, West Bengal, Assam, Pondicherry, and Tamilnadu. The voice of opposing the proposal heard from every side. The first to oppose were the Bharatiya Mazdoor Sangh that is close to R.S.S. The opposition too was creating a big issue out of it. Rahul Gandhi was always targeting the government related to the tax imposed on E.P.F. The All India Trade Union Congress is going to hold a protest against the tax imposed on E.P.F on 10th March.
Three statements that created confusion after Fiscal budget
Statements on E.P.F
Arun Jaitley said in his Budget speech that after 1 April 2016 no tax would be imposed on 40 percent of the Employee Provident Fund contribution. That would mean that the remaining sixty percent of the input on E.P.F would be taxable.
Revenue Secretary Hasmukh Adhiya said that only the interest on sixty percent of the E.P.F would be payable. It means that the sixty percent of the contribution in E.P.F is the principal amount and is non-taxable. The interest generated from it is taxable.
Jayant Sinha on the taxable contribution of E.P.F said that the tax on sixty percent f the E.P.F contribution can be saved if it is investing in any Pension Scheme. It means that on not investing it, the sixty percent of the E.P.F contribution would be taxable.
Statements of Interest
Finance Minister in the Union Budget said on the Pension schemes, but he didn’t mention anything about interest.
Revenue Secretary Hasmukh Adhiya stated that the interest on the sixty percent contribution of the Employee Provident Fund would be taxable.
Jayant Sinha on the taxable gift of E.P.F stated that he suggest that the tax should be imposed on the interest or return not on the sixty percent of the contribution of E.P.F.
Tax of EPF will effect affect crore’s of employees, said Arun Jaitley
How the saving would have been affected
Take an example; you are getting retired on this year’s December. From April 1st and 31st December, you have fifty thousand rupees in your P.F account. In this case, the sixty percent of the total amount would be equal to thirty thousand rupees.
If the sixty percent of the E.P.F would have been taxable as Arun Jaitely said, then the entire thirty thousand would have been taxable.
If the interest on sixty percent of the E.P.F would have been taxable as Revenue Secretary Hasmukh said, then as per 8.85% of thirty thousand i.e. 2655 would be the interest and it would have been taxable.
How many of us would be affected?
If the sixty percent of the E.P.F would have been taxable as Arun Jaitely said, then around 3.7 crores of EPFO subscribers would have been affected.
If the interest on sixty percent of the E.P.F would have been taxable as Revenue Secretary Hasmukh said, then the seventy lakh corporate employees with high salaries would have been affected.