Prime Minister Narendra Modi will decide on whether the government should reverse a Budget decision to tax withdrawals from the Employee Provident Fund or EPF, sources said, after widespread outrage over the move.
Sources said a complete rollback of the Budget proposal is unlikely, but the government is looking at ways to soften the blow for about 6.5 crore salaried people.
Finance Minister Arun Jaitley, who had announced the tax on EPF withdrawals in his Budget speech on Monday, today briefed BJP lawmakers on the controversial move, explaining that the government wants to encourage people to have a steady income after retirement.
The Budget says that after April 1, employees will have to pay income tax on 60 per cent of the amount they withdraw from the Employee Provident Fund or EPF. The remaining 40 per cent will be tax free. Right now, the full amount is tax free.
While salaried people have lashed out at the government over the move, opposition parties have accused it of betraying the middle class.
The government says the move is aimed at bringing parity between the Employees' Provident Fund and the National Pension System (NPS). Mr Adhia also clarified on Monday that there will be no tax on 60 per cent of EPF withdrawn if it is invested in annuity (pension) products for earning regular income.
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