Prime Minister Narendra Modi has asked Union Finance Minister Arun Jaitley to reconsider the budgetary proposal under which a part of the Employees Provident Fund withdrawal will be taxed, according to highly placed sources.
Modi asked Jaitley to do away with tax imposed on EPF withdrawal after a massive row over the proposal. According to sources, Modi asked Jaitley to revisit the proposed tax on 60% of Employees Provident Fund withdrawal.
Notably, Jaitley had justified the move to bring in the taxation proposal in the Union Budget 2016-17. While claiming that the proposal would encourage pension savings, Jaitley also said that there was a very large segment of tax defaulters in the country.
The Finance Minister made it clear that the Narendra Modi government's aim is to create an insured India and presumptive taxes will benefit the small and medium taxpayers.
In his post-Budget 2016-17 interaction with industry chambers, the Finance Minister pointed that the revenue department is doing an important job to make sure that people comply.
The government had also come 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 had said, "The government is looking into the issue."
Addressing an event organised by CNBCTV-18 and Mint a day after the Budget was presented, Revenue Secretary Hasmukh Adhia had 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 had said.
He refused to speculate on whether there would be a rollback, saying the Finance Minister is "at liberty to decide".