New Delhi: Facing flak over its proposal to tax provident fund withdrawals, the government on Tuesday stoutly defended its move but promised to consider demands for a possible partial rollback.
The government came out with a press note that it was considering demands to limit the tax only to interest accrued. Minister of State for Finance Jayant Sinha said,"The government is looking into the issue."
Later at an event organised by CNBCTV-18 and Mint, Revenue Secretary Hasmukh Adhia said the tax was an incentive to push towards a pensioned society
"Now we are encouraging people to take pension products so that they are secured. Now we are using taxation as an instrument to incentivising them. We are not taking away their liberty, they are well within their rights to withdraw a 100 percent but it will come with a cost," Adhia said.
He refused to speculate on whether there will be a rollback, saying the Finance Minister is "at liberty to decide."
Minister of state for Finance Jayant Sinha, Economic Affairs Secretary Shaktikanta Das and Niti Ayog's CEO Amitabh Kant too were part of the even which was an interaction on the Budget with the captains of industry.
Many of the questions that were asked to the participants, especially over social media platforms, were on the controversial EPF tax.
Earlier in the day, Adhia had said only interest on 60 per cent of contributions made after April 1, 2016 will be taxed and that the principal amount of contribution will remain untouched at the time of withdrawal.
The Ministry statement said 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 they will not be affected by the proposed changes.
Finance Minister Arun Jaitley in his Budget for 2016-17 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 proposals were immediately attacked by various employee unions including RSS-backed BMS and also the political parties who termed it as "an attack on the working class and a clear case of double taxation."
The Ministry said in its statement, "We have received representations today from various sections suggesting that if the amount of 60 per cent of corpus is not invested in the annuity products, the tax should be levied only on accumulated returns on the corpus and not on the contributed amount.We have also received representations asking for not having any monetary limit on the employer contribution under EPF, because such a limit is not there in NPS."
The statement said the Finance Minister would consider all suggestions before taking a decision.
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