Govt’s pension security logic has no takers
Veteran trade union leader Gurudas Dasgupta described the move an attack on labour. At one side, government talks about welfare of poor, while on the other side the same government is taking their hard-earned money through tax,” Dasgupta said, adding that it’s a move to discourage private employees from depositing more than permissible amount.
“The decision to bring interest incurred on EPF under tax net clearly indicates that government is discouraging employees from depositing more than the fixed amount, which is at present 10 per cent of their income,” he said.
Given that EPF is mandatory as per Labour Law, in most of the cases it has been noticed that employees deposit up to 20 per cent in their EPF account as it’s a secure fund and earn more interest than any other term deposit schemes. “The government move takes away the opportunity from the poor to deposit in a secure fund,” said Bharatiya Mazdoor Sangh general secretary Brajesh Upadhyay. “We won’t allow government to take any anti-poor decision,” he added.
Facing flak for proposing a tax on employee provident fund withdrawals, finance minister Arun Jaitley on Wednesday said he will spell out the final decision on the matter when he replies to the debate on Budget in Parliament. After Budget 2016-17 proposed taxing 60 per cent of the withdrawal from employees’ provident fund (EPF) on contributions to be made after April 1, the government on Tuesday hinted of a partial rollback.
At a meeting organised by industry chambers on Budget provisions, Jaitley said the move was directed at high-salaried class and not the overwhelming section of 3.7 crore EPF members.
Jaitley said the objective behind the proposal was that no tax is levied on 40 per cent of the withdrawal which can be used for meeting retirement commitments. The balance, he said, can be converted into annuity and the person would get a regular pension and he does not pay tax.
“There is also a change in the law that when inheritance comes in there is no tax payable,” he said. “This was intended to incentivise people in the private sector also to use it as a kind of pension fund and to disincentive those who otherwise would indulge in consumption of that fund this move was made.”
Labour Minister Bandaru Dattatreya said government was consulting all stake holders on the budgetary proposal to tax contributions to employees’ provident fund (EPF). Notably, in a similar case former Finance Minister Yashwant Sinha, during NDA I, had amended the labour law in 2002 and had allowed retrenchment of workers in sick units from 100 workers to upto 1,000 workers without prior permission of the government. Sinha had faced the wrath of the labour unions and was replaced as Finance Minister.
Meanwhile, Trinamool Congress leader Sudip Bandhopadhya raised the issue of taxing EPF withdrawal in the Lok Sabha on Wednesday after the Question Hour. His persistent query on the matter invited attention of Finance Minister Arun Jaitley, who said the government would look into it.