Buckling under pressure, the Modi
government announced Tuesday in Parliament that the proposal to tax 60 percent
of the Provident Fund of employees has been withdrawn.
"We propose to withdraw the
tax ... tax proposal for the scheme NPS has remained," said Finance
Minister Arun Jaitley in Lok Sabha on Tuesday, adding that "the intention
was to encourage a pensioned society" .
In his budget proposal, Jaitley
had proposed that 40 per cent of EPF withdrawals would be tax-free and the
remaining 60 percent would also get the same treatment provided that the amount
invested in pension annuity.
This proposal was criticized by
parties and unions, saying amounting to force employees to invest in pension
annuity.
Vice president of Congress Rahul
Gandhi reacted to development in Parliament, which says: "I felt the
middle class people were being harmed by the government, so he decided to put a
little happy to have some relief pressure.".
"Employees should have the
choice of where to invest. Theoretically such freedom is desirable, but it is
important for the government to achieve policy objectives through the
instrumentality of taxes. In this form, the policy objective is not to get more
revenue but to encourage people to join the pension plan, "Jaitley said
explaining the reasons for the proposed taxation.
The proposal would not hit Rs
3.26 million subscribers EPFO drawing legal wage of up to 15,000 rupees per
month. Employees Provident Fund Organisation (EPFO) has a total subscriber base
of 3.7 million rupees.
Several unions threatened to
stage a protest against the government on Thursday seeking immediate reversal
of the Centre's proposal.
"The EPF tax measure will be
a terrible blow to six million rupees employees covered under the EPF ... The
central government led by the BJP is playing with the future law. The proposal
must be reversed immediately," Ajay Maken Congress chief Delhi had said at
the protest at Jantar Mantar.
Maken said, according to the
budget proposal, an employee will have to invest 60 percent of the PF in the
annuity "as desired by the government" if he does not want to pay
taxes on the amount received at the time of retirement .
He said the move was aimed at
helping insurance companies, particularly private.
"Employees are dependent on
their wages for their life and retirement that depend on their savings from EPF
for the marriage of his daughter and housing, and if the tax is levied on the
EPF would be a big blow to the salaried class," said.
The Union Budget for 2016-17
proposed taxing 60 percent of withdrawals from the Employees Provident Fund
(EPF) contributions to be made on April 1, unless the sum is reinvested in the
product pension as an annuity.
Referring to statements by
Congress Vice President Rahul Gandhi on compliance with the window once in the
black money, Maken said the workers of Congress "fully" support in
"their struggle to protect the interests of the sectors most weak".
"Congress knows how to
govern and workers also take to the streets if the situation demands to protect
the interests of ordinary people," Maken said.
Taking a swipe at Modi's
government on compliance window once announced in the budget of the Union,
Rahul had described as a scheme of "fair and beautiful" designed to
convert black money into white.
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