Government may restore some tax benefits on EPF
NEW DELHI: The government is set to restore some of the tax benefits on Employees Provident Fund (EPF) as early as Tuesday.
The Budget has proposed to tax 60% of the EPF corpus at the time of withdrawal, but deposits made up to March 31, 2016 would be exempted from the proposed levy.
The government is considering several options to cushion the impact of the proposal on the salaried middle class in view of the protests from within the BJP, opposition and other quarters.
Lok Sabha sources said finance minister Arun Jaitley had written to Speaker Sumitra Mahajan seeking permission to make the statement on Friday which would have outlined the revised proposal. However, the House was adjourned because of former Speaker P A Sangma’s death. Sources said the FM may seek to make the announcement on Tuesday when the House reassembles on Tuesday.
The government is learnt to be looking at various options, one of them being levying tax only on the interest earned on the corpus created from April 2016, while exempting the principal from the levy. Another option is to keep the tax limited to accounts which are opened from April 2016.
Although the finance ministry has said that only 70 lakh out of 3.70 crore active EPF subscribers will be impacted by the proposed tax change, a rethink has been prompted because of protests from the vocal middle class. There has also been recognition that the plan to tax EPF is the only major proposal to have attracted significant criticism.
On Tuesday, while addressing the BJP parliamentary party, Jaitley had said he will alter the proposal if Prime Minister Narendra Modi asked him to do so.
It is unclear if the government intends to retain the tax on employers’ contribution of over Rs 1.50 lakh a year.
Sources also said the relief may not attract the provisions of model code of conduct which has come into effect with the announcement of poll dates for five states and restrains the government from making announcements which can be seen as sops to voters. The prohibition does not apply to proposals which are before Parliament. In any case, Jaitley’s letter seeking permission for the statement in Lok Sabha had reached the Speaker on Friday morning, several hours before Election Commission announced the dates.
Source : Economic Times