Finance minister Arun Jaitley on Wednesday said he would spell out the final decision on taxing withdrawals from the Employees’ Provident Fund (EPF) at the time of replying to a debate in Parliament. The Budget decision proposing to tax 60 per cent of the withdrawal from EPF contributions to be made after April 1 has come in for sharp criticism. The finance ministry on Tuesday indicated a partial roll back of the move.
“Now there have been some reactions (on EPF tax issue). When the debate comes up in Parliament, I will give the government’s response as to what decision we finally take in this matter,” Jaitley said, while speaking at a post-Budget conference with industry chambers. The minister said the EPF withdrawal tax is not aimed at raising revenues, rather the emphasis of the government is to make India a pensioned and insured society. No tax will levied if the corpus at the time of withdrawal is invested in pension-based annuities, he said.
In a clarification on the issue on Tuesday, the finance ministry said the “original members” of EPFO, who are within the statutory wage limit of Rs 15,000 per month will not be impacted by this proposed change. The move will impact only about 70 lakh out of the total 3.7 crore EPFO subscribers.
“The EPFO has about 3.7 crore members of which about 3 crore members are those in the earning category of Rs 15,000 and below. For them there is no change,” he said. “It is only those private sector employees who have just joined that this will impact them.”
The finance ministry is also considering suggestions of levying tax only on accumulated returns on the corpus and not on the contributed amount. The proposal is being criticised by various employees unions including RSS-backed Bharatiya Mazdoor Sangh, political parties and the EPFO’s Central Board of Trustees. On other taxation proposals, Jaitley said the Budget was focused on simplifying tax rules and it expanded the scope of presumptive taxation to make taxpayers’ life easier. Arguing that the thrust of government expenditure must be in agricultural and rural sectors, he said the actual development expenditure of the government will exceed the Budget estimates in the current year.
He said the government collected more revenue in the current year and spent more, as higher public investment improved growth. Indian economy is projected to grow at 7.6 per cent in 2015-16. He reiterated Centre’s committed to meet fiscal deficit target of 3.5 per cent of GDP for the next fiscal.