New Delhi, March 2 (IANS) Addressing the strong reaction provoked by the Budget 2016-17 proposal on tax treatment of provident fund contributions, Finance minister Arun Jaitley on Wednesday said he would announce the final decision on the matter when he replies to the debate on the Budget in parliament.
“Now there has been some reactions. 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 told representatives of industry associations FICCI, CII and Assocham at a post-Budget 2016-17 meeting here.
In his budget speech on Monday, Jaitley said that 60 percent of withdrawals from the provident fund accounts will be taxed on contributions to be made after April 1.
The finance minister said the aim of the move is to make India a more insured and pensioned society.
“The revenue department had considered various aspects of the National Pension Scheme and Employee Provident Fund Organisation (EPFO). Their intention is not revenue raising, that was not the principal intention,” he said.
“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. It is only those private sector employees who have just joined that this will impact them,” he added.
With confusion created over whether only the interest will be taxed upon withdrawal, or the whole corpus itself built after April 1 this year, a finance ministry release on Tuesday said: “We have received representations today from various sections suggesting if the amount of 60 percent of corpus is not invested in annuity products, tax should be levied only on the accumulated returns of the corpus and not on the contributed amount.”
“We have also received representations asking for not having any monetary limit on employer contribution under EPF because such limit is not there in NPS. The finance minister would be considering these suggestions and taking a view on it in due course,” it added.
Meanwhile, platform for social change Change.org said in a release here on Wednesday that over one lakh people have supported a campaign started on their website on the EPFO issue.
A petition asking the ministry to withdraw the decision “went viral within two days and over one lakh people have expressed their outrage on this Change.org petition,” it said.