Arun Jaitley withdraws EPF tax for a Pensioned Society

The Central government on Tuesday withdrew the 60% tax the Budget 2016 sought to levy for Provident Fund withdrawals. The salaried class all over the country was agitated by the PF tax, which would have broken their back in their old age. Finance Minister Arun Jaitley withdrew the proposal on taxation of Provident Fund in Parliament. This meant there was total rollback on the proposal for now. Owing to mounting criticism over the proposal, Prime Minister Narendra Modi had told the Finance Minister that the PF tax be deferred for now. A detailed examination of the proposal could be made later. Jaitley had proposed in his budget that after April 1, 60% of the amount deposited in the EPF account of an employee would be taxable at the time of withdrawal, and that 40% would be tax free. In the past, the salaried class had enjoyed the entire amount as tax free at the time of withdrawal or retirement. The employee had only to complete 5 years of continuous service for the benefit. Trade unions and RSS affiliates chafed at the proposal. The Finance Minister had at a meeting of NDA MPs last Tuesday explained the proposal in detail. He told them that any decision on a reversal would be taken by the Prime Minister. Now the Prime Minister made his point clear that no tax be levied on Provident Fund withdrawals. Jaitley, who made the clarification in the Lok Sabha, said according to the provision, in case 60% is re-invested by an employee in an annuity or pension fund, then it would be tax-free. The Finance Minister said that the idea behind the EPF tax was to create a pensioned society, especially among the private sector employees who have no provision for pension.