FM Arun Jaitley to clarify govt’s final stand on EPF in Parliament todayhttps://indianexpress.com/article/business/business-others/fm-arun-jaitley-to-clarify-govts-final-stand-on-epf-in-parliament-today/

FM Arun Jaitley to clarify govt’s final stand on EPF in Parliament today

On February 29, the Union Budget 2016-17 had proposed a tax on 60 per cent of the EPF corpus at the time of withdrawal.

Finance Minister Arun Jaitley on Thursday. PTI
Finance Minister Arun Jaitley. (Source: PTI)

Finance Minister Arun Jaitley will make a statement in Parliament on Tuesday clarifying the government’s final position on the Budget proposal to partially tax the corpus from Employees’ Provident Fund (EPF) and superannuation funds at the time of withdrawal. Indications are that the government will rollback this tax provision even as it is unlikely to exempt employer contribution to PF above Rs 1.5 lakh from withdrawal tax.

On February 29, the Union Budget 2016-17 had proposed a tax on 60 per cent of the EPF corpus at the time of withdrawal. In clarifications that finance ministry issued after the budget on March 1, the government said this tax will not hit 3 crore EPF subscribers who earned salary up to Rs 15,000 per month and that the tax was aimed at 70 lakh high income EPF subscribers earning more than this amount.

The proposal to tax EPF corpus has faced criticism from across political parties, trade unions including the RSS-affiliated Bharatiya Mazdoor Sangh and members of the Central Board of Trustees of the EPFO. Government officials have indicated that the Prime Minister’s Office has intervened in favour of rolling back this tax proposal. The finance ministry said last Tuesday that the government is considering various demands on the issue including levying tax only on accumulated returns on the corpus and not on the contributed amount. The ministry said if subscribers buy annuity at the time of withdrawal, they will not be taxed.

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The ministry had also received demand from various groups for removal of proposed monetary ceiling of Rs 1.5 lakh on employer contribution or ceiling of 12 per cent of employer contribution, whichever is less and it is also being considered. Currently, there is no monetary ceiling on the employer contribution under EPF with the only ceiling being that it would be 12 per cent of the salary of the employee member.

The Centre proposed tax on 60 per cent of the corpus of provident fund at the time of withdrawal from EPF, in line with the NPS, and other pension plans where the government has proposed to exempt 40 per cent of the corpus from tax at the time of withdrawal.

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“We have received representations today from various sections suggesting that if the amount of 60 per cent of corpus is not invested in the annuity products, the tax should be levied only on accumulated returns on the corpus and not on the contributed amount. We have also received representations asking for not having any monetary limit on the employer contribution under EPF, because such a limit is not there in NPS (National Pension System). The finance minister would be considering all these suggestions and taking a view on it in due course,” the ministry had said.