PM Modi Asks Jaitley To Review Employees' Provident Fund Tax Proposal

06/03/2016 8:10 AM IST | Updated 15/07/2016 8:26 AM IST
STRDEL via Getty Images
Indian Prime Minister Narendra Modi (L) and Finance Minister Arun Jaitley talk during an event to launch an initiative to bolster start-ups in New Delhi on January 16, 2016. Indian entrepreneurs will receive generous tax breaks and face dramatically reduced red tape when starting and closing a business, Prime Minister Narendra Modi said January 16, as he launched a pet initiative to bolster India's fast-growing startup scene. Speaking at a gathering of 2,000 entrepreneurs from India, Silicon Valley and elsewhere, Modi outlined a slew of measures under Start Up India including exempting startups from income tax for their first three years. AFP PHOTO / STR / AFP / STRDEL (Photo credit should read STRDEL/AFP/Getty Images)

In what comes as some great news to the salaried class, the much criticised plan to levy tax on 60% of employees' provident fund withdrawal may be withdrawn.

This government has decided to defer its plan following an intervention by Prime Minister Narendra Modi.

According to reports, Finance minister Arun Jaitley is expected to announce the decision in Lok Sabha on Tuesday when Parliament reassembles.

PM Modi has reportedly requested Jaitley to put the tax proposal on hold, saying the matter needed to be studied in detail in view of protests from the salaried middle class. Modi reportedly told Jaitley to "explore ways to review" it.

In his 2016-17 budget, Jaitley had proposed that after April 1, 2016, 60 percent of the amount deposited in the EPF account of the employee will be taxable at the time of withdrawal, while 40 per cent will be tax free.

Earlier, the entire EPF deposit was tax-free at the time of withdrawal if the employee has completed five years of continuous service.

PM Modi's intervention will bring relief to nearly 60 lakh EPF subscribers who earn more than 15,000 a month.

The announcement was met with much criticism and protest from the opposition, trade unions and even RSS affiliates. #RollbackEPF emerge as one of the most trending hashtags on Twitter a day after the Budget announcement.

Last Tuesday, the Finance Minister had at a meeting with the NDA lawmakers and explained the proposal. He had said that any decision on a reversal would be taken by the Prime Minister.

The government was considering two options - first a proposal to tax only the returns on withdrawal and second a possible rollback of the provision, reports NDTV.

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.

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