Trade unions have asked the government to shelve the proposal in the draft Direct Tax Code to tax all savings and provident fund schemes at the time of withdrawal, saying the move would hit the salaried class hard.
"This efforts of (bringing PF withdrawals under Income Tax purview) shall adversely hit the salaried class as their social security shall be seriously hampered. This is just not acceptable," the Hind Mazdoor Sabha said in a letter to the Finance Minister Pranab Mukherjee.
Cautioning the government that implementation of the proposal could create a "serious situation", the HMS appealed to the finance minister "not to open...A confrontational front".
The Secretary of the All India Trade Union Congress, D L Sachdev, also raised concerns about the proposal and said the union would take up the issue with the government.
The draft DTC, on which the government has invited comments from public, has argued for bringing all the savings scheme under the EET (Exempt, Exempt, Tax) mode of taxation.
At present, no income tax is levied either at the time of contribution, accrual of interest, or withdrawal of provident funds by the subscribers.