NEW DELHI, March 1 - Under all-round attack, the Government today promised to consider demands for a rollback of the proposal to tax 60 per cent of withdrawals from provident fund and a ceiling on employers� contribution, but made it clear that PPF will continue to be exempt from tax.
Revenue Secretary Hashmukh Adhia went a step further to say that only 60 per cent of interest on contributions made after April 1 will be taxed and that the principal amount of contribution will remain untouched at the time of withdrawal.
However, a Government press note issued today made no mention about taxing only the interest.
It claimed that the new tax proposal was aimed at taxing only the high-salaried individuals, totalling about 70 lakh people out of the 3.7 crore employee provident fund (EPF) members. About 3 crore individuals come under the statutory wage limit of Rs 15,000 per month, so will not be affected by the proposed changes.
Finance Minister Arun Jaitley in his Budget for 2016-17 yesterday had proposed that 60 per cent of the withdrawal on contribution to employees PF made after April 1 this year will be subject to tax. This would apply to superannuation funds and recognised provident funds, including EPF.
He also proposed a monetary limit for contribution of employer in recognised PF and superannuation fund at Rs 1.5 lakh per annum for taking tax benefit.
The proposal came under immediate attack from various employees� unions, including RSS-backed BMS, and political parties who termed it as �an attack on the working class and a clear case of double taxation.�
The Finance Ministry issued a press note containing a clarification about the proposed changes in the tax treatment of recognised PFs and recognised pension schemes, noting that there seems to be some amount of lack of understanding about the changes made in the Budget on the issue. � PTI