• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Home
  • DOPT ORDERS 2020
  • FinMin Orders 2020
  • Railway Orders 2020
  • Contact Us

7th Pay Commission Latest news

Central Government Employees News

  • DOPPW Orders
  • 7th Pay Commission
  • Dearness Allowance
  • Dearness Relief
  • CSD Price List
  • Defence
    • Defence Pension
You are here: Home / National Pension System / EPF tax may return in new packaging

EPF tax may return in new packaging

March 10, 2016 pcadmin Leave a Comment

EPF tax may return in new packaging

Government looks for ways to mitigate backlash, may apply levy on people earning above a certain base.

New Delhi: The controversy over it may have settled down for now, but the employees’ provident fund (EPF) tax will likely return with a different name and approach. The central government is now figuring out the mechanics of levying the EPF tax on people who earn higher salaries, according to two government officials who requested anonymity.

And this time, the tax will be well-deliberated, well-planned, and the government ready with a plan to effectively mitigate any backlash, they added. Indeed, it won’t even be called a tax.

The idea is to achieve, at least for this segment of individuals, some parity between EPF and the National Pension System.

The budget proposal was for a straightforward tax on withdrawals from the EPF.

“The aim is to create a pension society, and pensions are always taxable,” said the first official. “We have the mechanism to make this happen and it’s being worked on.”

This fits in with what the finance minister said in Parliament on Tuesday as he withdrew the tax on EPF. “There are various other suggestions, which can also achieve the same policy objective of encouraging people to join the pension scheme,” Jaitley had said.

So, how will it be done?

The mechanics

An employee currently pays 12% of his basic salary towards EPF. An equal contribution is paid by the employer.

In the case of people earning below Rs.15,000 a month, from the employer’s contribution, around 30% (or 3.67% of the 12%) mandatorily goes to the EPF and the rest (8.33%) goes to the employees’ pension scheme (EPS) run by Employees’ Provident Fund Organization (EPFO).

This is based on the logic that these not-so-well-paid employees will need some form of regular income, through pensions, after retirement.

The government is likely to suggest that this apply to people earning above a certain base—probably not Rs.15,000 a month because it doesn’t want to be the target of the middle-class ire again, but, say, Rs.1 lakh or Rs.2 lakh a month.

While the employee’s contribution of 12% is taxed beyond Rs.1.5 lakh a year and is part of the Section 80C exemptions, the employer’s contribution of 12% is tax-free on the entire amount.

This works to the benefit of the well-paid, white-collar workers, said the first official.

How?

They do not pay tax on the employer’s contribution, the official said, adding that someone who earns Rs.1 crore a year (cost-to-company, which means the provident fund contribution of the employer is also factored in) actually ends up getting Rs.12 lakh of this pay tax-free.

“This is where the change will be brought in,” the official said.

This person added that these people will be asked to opt for having 8.33% of the employer’s contribution now go to the EPS and 3.67% to the EPF. In addition, 12% of their basic pay will go to the EPF as their own contribution.

Effectively, this means that a little over a third of the total contribution (8.33 of 24) will go to the pension scheme.

If they don’t opt for this, the 8.33% will be taxed. If they do, then pension earnings are taxable at the rate of individual tax slab. Either way, the government gets more tax than it does now out of them.

According to the finance ministry, 30 million of the 37 million subscribers of the EPF earn less than Rs.15, 000. The remaining 7 million actually contribute more than 55% of the annual accrual to the EPFO. The government believes this includes a significant number of people who can be taxed because they are well-heeled.

The first official said that the government will decide on the salary threshold, and a decision will be taken only after consultation with the labor ministry, which was not consulted before the controversial budget announcement that had to be rolled back.

“The group of ministers dealing with labour reforms will hold discussions with stakeholders and explain the proposals but only after the state elections in April and May,” the official said.

The government seems to have garnered some support from the trade unions that have been criticizing the government over labour reforms.

“The intention of pension was good, but the method used was not good at all. EPF tax was a bad decision in an overall good budget with a rural focus,” said Virjesh Upadhyay, general secretary, Bharatiya Mazdoor Sangh, a central trade union affiliated to the ruling Bharatiya Janata Party.

Union labour minister Bandaru Dattatreya said the withdrawal of the EPF tax was a pro-people move after “government discussed the pros and cons of the budget announcement”.

He declined comment when queried on whether this reprieve would be temporary and if the tax would be coming back in any other form.

Source : Livemint

Filed Under: EPF, National Pension System, PF

Also Read

Punctuality in attendance in Government offices

Punctuality in attendance in Government offices

May 23, 2023 By pcadmin Leave a Comment

Punctuality in attendance in Government offices GOVERNMENT OF WEST BENGALFinance DepartmentNABANNA325, Sarat Chatterjee Road, Howrah-711102 No. 3370 -F(P2) Dated, Howrah, the 20th May, 2023 M E M O R A N D U M Sub : Punctuality in attendance in Government offices In order to … [Read More...] about Punctuality in attendance in Government offices

Ceiling of Rs. 5 Lakh on Subscription in General Provident Fund

Ceiling of Rs. 5 Lakh on Subscription in General Provident Fund

May 23, 2023 By pcadmin Leave a Comment

Ceiling of Rs. 5 Lakh on Subscription in General Provident Fund Government of West BengalFinance DepartmentGroup-J Memo No: 027-F (J) WB Date: 04/05/2023 MEMORANDUM Subject:- Ceiling of Rs. 5 Lakh on subscription in General Provident Fund (West Bengal Services) in a financial … [Read More...] about Ceiling of Rs. 5 Lakh on Subscription in General Provident Fund

GISS, 1987 – Table of Benefits upto July, 2023

GISS, 1987 – Table of Benefits upto July, 2023

May 23, 2023 By pcadmin Leave a Comment

GISS, 1987 – Table of Benefits upto July, 2023 GOVERNMENT OF WEST BENGALFINANCE DEPARTMENTAUDIT BRANCH No. 031-F(J) W.B. Date: 11.05.2023 MEMORANDUM SUBJECT: State Government Employees Group Insurance Scheme, 1987 – Table of Benefits under Savings Fund for the year of cessation of … [Read More...] about GISS, 1987 – Table of Benefits upto July, 2023

Disbursement of Railway Pension through Private Sector Banks

Disbursement of Railway Pension through Private Sector Banks

May 23, 2023 By pcadmin Leave a Comment

Disbursement of Railway Pension through Private Sector Banks Government of IndiaMinistry of RailwaysRailway Board RBA No. 16/2023 No. 2010/AC-II/21/10/Pt IV New Delhi, dated 15.5.2023 Pr.Financial Advisors,All Zonal Railways & PUS Pr. Chief Personnel Officers,All Zonal Railways … [Read More...] about Disbursement of Railway Pension through Private Sector Banks

Clarification on calculation of ex-gratia for the employees of CPSEs following IDA

Clarification on calculation of ex-gratia for the employees of CPSEs following IDA

May 18, 2023 By pcadmin Leave a Comment

Clarification on calculation of ex-gratia for the employees of CPSEs following IDA W-02/0029/2021-DPE (WC)Government of IndiaMinistry of FinanceDepartment of Public Enterprises Public Enterprises Bhawan,Block 14, Lodi Road,New Delhi 110003.Date: 16.5.2023 CORRIGENDUM Subject: … [Read More...] about Clarification on calculation of ex-gratia for the employees of CPSEs following IDA

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

All About Pension

All about Pension

Latest DOPT Orders

Grant of fund for modernisation of Non-Statutory Departmental Canteen located in Central Government Offices

General Election 2023: Grant of Paid holiday on day of Poll for General Election in Karnataka, 2023

Reimbursement of Children Education Allowance (CEA) to Central Government servants having Divyang Children

Addendum for early closure of all the offices falling in the premises of Parliament House & Rashtrapati Bhawan in c/w forthcoming Republic Day

Early Closure of Offices in connection with Republic Day Parade/Beating Retreat Ceremony/At Home Function during January, 2023

Latest Finmin Orders

CGEGIS 1980 – Tables of Benefits for the savings fund for the period from 01.04.2023 to 30.06.2023.

Dearness Allowance to Central Government employees effective from 01.01.2023 – FINMIN Order

Compendium of Instructions regarding grant of House Rent Allowance to Central Government employees – FINMIN

CGEGIS 1980: Table of Benefits of saving funds from Oct to Dec 2022

Non-Productivity Linked Bonus (ad-hoc bonus) to Central Government Employees for 2021-22

Latest Railway Orders

Disbursement of Railway Pension through Private Sector Banks

Dearness Relief to Railway pensioners from Jan 2023

State Railway Provident Fund Interest Rate from April 2023 to June 2023

Timely verification of Caste/Community Certificates – Railway Board Order

Timelines for completion of APAR to Railway Employees for 2022-23

Categories

Copyright © 2023