New Delhi:
Finance Minister Arun Jaitley will clarify the government's stand on the Budget proposal to tax Employees' Provident Fund or EPF withdrawals in Parliament today.
Following criticism over the proposal, Prime Minister Narendra Modi had reportedly suggested to the Finance Minister that the tax be deferred for now and that a detailed examination of the proposal be done.
In his budget, Mr Jaitley had proposed that after April 1, 2016, 60 per cent of the amount deposited in the EPF account of the employee will be taxable at the time of withdrawal, and 40 per cent will be tax free. Earlier, the entire amount was tax free at the time of withdrawal if the employee has completed five years of continuous service.
Following criticism from the opposition, trade unions and even RSS affiliates, the Finance Minister had at a meeting of NDA lawmakers last Tuesday explained the proposal in detail and had added that any decision on a reversal would be taken by the Prime Minister.
NDTV had learned earlier that the government was considering two options - first a proposal to tax only the returns on withdrawal and second a possible rollback of the provision. While taxing the interest on the withdrawal would need only a clarification of intent in Parliament, a rollback may need an amendment which may be moved when the Budget comes for discussion in the Lok Sabha.
As the opposition demanded a rollback, the government had claimed that the EPF scheme was being used by the high salaried to evade taxes while it was originally meant for those in the non-government sector earning less than Rs. 15,000 per month.
The ministry said the new rule will affect only high earners in the private sector - about 60 lakh of the 3.7 crore people who contribute to the EPF. The others are government employees who are covered under government's provident fund and not EPF or private employees in a lower income group with a monthly salary bracket of Rs. 15,000, and will not be included in the tax scheme, it said.