Following a backlash, both in and outside Parliament, for dipping into retirement savings of the working class, Union Finance Minister Arun Jaitley on Tuesday announced the withdrawal of the budget proposal of taxation of EPF.
In view of the representations received, including from Members of Parliament, said Mr. Jaitley: “the Government would like to do comprehensive review …and therefore I withdraw the proposal”.
The proposal of 40 per cent exemption given to the National Pension Scheme (NPS) subscribers at the time of withdrawal remains, the Finance Minister clarified in his statement.
The objective of the reform proposed in the budget that was withdrawn on Tuesday was “not to get more revenue but to encourage the people to join the Pension Scheme”.
The decision to withdraw it, however, was taken after suggestions were received from MPs that the change will “force people to invest in annuity product even if they are not willing to do so”. The main argument, he said, was that the employees should have the choice of where to invest.
The proposal withdrawn sought to make upto 60 per cent of savers’ corpus withdrawn from the the EPF tax free if invested in Annuity, according to the statement Mr. Jaitley laid in the Lok Sabha on Tuesday. The period return on the annuity was to be taxable.