Bringing cheers to salaried tax payers, Union Finance Minister Arun Jaitley has announced that the government is withdrawing its budget proposal of taxation of Employee Provident Fund (EPF). Jaitley said that the purpose to tax EPF withdrawals was to encourage a pensioned society. This proposal was criticized by the parties and the unions which said it amounted to forcing employees to invest in pension annuity schemes.
The objective of the reform proposed in the budget that was withdrawn was not to get more revenue but to encourage the people to join the Pension Scheme. The decision to withdraw the proposal was taken after suggestions received from Member of Parliament that the change will force people to invest in annuity product even if they were not willing to do so.
Jaitley further stated that the proposal withdrawn sought to make upto 60 per cent of savers' corpus withdrawn from the EPF tax free if invested in Annuity. The period return on the annuity was to be taxable. Meanwhile the Finance Minister said that a Budget proposal to make 40 per cent of the total withdrawal from the National Pension Scheme (NPS) tax free, announced along with the EPF scheme, will however remain unchanged.