 "Budget debate focus on tax on EPF")
In the Lok Sabha, he said he would address it during the Budget discussion in Parliament. He was responding to Trinamool Congress (TMC) members raising the issue soon after Question Hour.
TMC Member of Parliament (MP) Saugata Roy demanded that Jaitley make an announcement on this immediately. His party colleague Sudip Bandhyopadhyay said the Budget proposal to tax the Employees’ Provident Fund (EPF) — a contributory retirement fund — has caused nationwide concern.
Also Read
Earlier in the day, too, Jaitley had said, “There have been some reactions [to the Budget proposal]. When the debate comes up in Parliament, I shall give the government’s response on what decision we finally take.”
In his post-Budget interactions with industry and trade chambers, the finance minister said Parliament had the first right to know how the government was treating suggestions on the Budget and the Finance Bill.
On Tuesday, a government statement had said the finance minister would consider the demand for limiting tax on 60 per cent of total withdrawn funds only on returns earned and not the principal.
The Budget has provided that 40 per cent of withdrawn funds from EPF would not be taxed. However, if the remaining 60 per cent is withdrawn lump sum, then there would be a tax to pay.
If the remaining 60 per cent is converted into annuities and the person concerned gets regular pension, there would not be any tax on withdrawn funds.
“The intention is not revenue generation. That is not the principal intention here,” Jaitley said.
The finance minister said the intention of the government was to make India an insured and pensioned society.
He also explained that the Employee Provident Fund Organisation has around 37 million members, of which about 30 million earns Rs 15,000 a month or less. For them, there is no tax liability.
“It is only the private sector employees on whom there is an impact. And, the objective was that if, to meet your various commitments you can withdraw up to 40 per cent, you need not pay tax. The balance is converted into annuities, you get a regular pension; you don’t pay tax,” he said.
This was intended as an incentive to private sector employees to use the fund as a pension, and not spend it.
However, the people of the country — and even some in Jaitley’s own party — don’t seem to like the idea.
Financial sector professional Vaibhav Aggarwal’s petition to the finance minister and the prime minister, seeking a rollback of the provision, has drawn 100,000 signatures in two days.
“Yet another issue that is bothering a majority of the hard-working middle class is seeing a massive outrage on the platform. We hope that the finance ministry responds positively to the concerns of all those who have signed this petition,” said Preethi Herman, the country lead of Change.org, which started the petition.
Unions, too, were not convinced of the government’s intentions. They said the EPFO already provided pension under its social security scheme.
“Seeing the opposition, Finance Minister Arun Jaitley is now trying to mince his words. The EPFO runs a comprehensive scheme which has all components — provident fund, pension and insurance,” said D L Sachdev, an EPFO trustee and the secretary of the All India Trade Union Congress.
He said the government is trying to create a market for pension products offered by insurance companies after raising foreign direct investment allowance in the sector to 49 per cent from the earlier 26 per cent
Members of the Sangh Parivar, of which the ruling Bharatiya Janata Party is a part, also criticised the proposal.
Rashtriya Swayamsevak Sangh-backed Bharatiya Mazdoor Sangh (BMS) President B N Rai described Jaitley’s contention as a “lameduck argument”.
“There is Employees’ Pension Scheme, 1995, run by the EPFO, which provides for pension after the age of 58 years to its subscribers. Then, where is the need for encouraging pension?”
“This is an anti-worker Budget proposal. Taxing PF means double taxation. PF is deducted from a salary on which workers have already paid tax,” said Virjesh Upadhyay, general secretary, BMS.
The Central Hall of Parliament was agog on Wednesday with discussions on the reversal of this provision.
Several MPs said they had heard the BMS was going to write to the prime minister and the finance minister to demand withdrawal of this scheme. BMS is particularly charged because it feels its own political autonomy has been attacked. It is a member of the Central Board of Trustees, the body that oversees the administration of EPF.
Several ministers, too, have told Business Standard, on the condition that they will not be named, that the move could hurt their party politically.
“I know. I understand. I am 100 per cent with you on this,” a senior minister told a roomful of journalists on the condition he would not be quoted.
At an event organised by Rajya Sabha TV, Jaitley had said, “The idea was to ensure that people don’t spend all their money before retirement and save some for after. The feedback that has come after the announcement is that people want to spend all their money. I will speak on the issue on the floor of the House.”
Before the Budget proposal, EPF was an EEE (exempt, exempt, exempt) scheme, which means that contribution, accretion and withdrawal from the fund were tax free. On the other hand, National Pension System (NPS) is EET (exempt, exempt, tax), which means withdrawal from it are taxed.
The Budget move is aimed at bringing parity between EPF and NPS.
Addressing the industry body CII, Revenue Secretary Hasmukh Adhia said that taxing the retirement fund withdrawal was the norm world over. “I am amazed that people are blocking the reform for which the time has come. Why should the educated people oppose this? We want to create a pension security for you, and world over, EET is the norm.”