Union revenue secretary Hasmukh Adhia defended the proposal to tax Employee’s Provident Fund withdrawals, saying the intention was only to encourage investment in pension schemes, but the phrasing in the Budget speech caused the confusion.
“The entire thing happened not because of any illogicality in the step but due to the communication gap,” Adhia said in a Budget interaction at the Ahmadabad Management Association.
“In the budget we try to concise the speech by minimising the words. If it goes beyond 1 hour and 30 minutes it becomes boring. When we were reducing the number of words and when it came to this paragraph we chopped it off and that is how the problem occurred,” Adhia said.
“We have not said that we will be taxing remaining 60 per cent (of withdrawn EPF). The first 40 per cent is totally exempt. Regarding remaining 60 per cent the expectation is you should put it in some pension scheme….To encourage people to put their money in pension products we have said if you put the remaining 60 per cent in annuity scheme it will not be taxed….original corpus after your death will go to your heir and that will also be tax exempt,” he said.
Meanwhile, Labour Minister Bandaru Dattatreya said he is holding discussions on the budget proposal to tax EPF withdrawals with the Finance Ministry and government will reveal final details on the issue during the debate on Budget.
“All these things will be revealed out at the time of the debate of the Finance Budget in the Parliament itself by Finance Minister (Arun Jaitley),” he told reporters here.
Arun Jaitley in his Budget for 2016-17 had proposed that 60 per cent of the withdrawal on contribution to employee PF made after April 1 this year will be subject to tax. This would apply to superannuation funds and recognised provident funds including EPF.
The proposal has come under attack from parties, unions and other stakeholders. Stepping up pressure on the Centre, Congress Vice President Rahul Gandhi today said he will continue to fight till it rolls back the proposal for levying tax on EPF withdrawals.