Trying to ease concerns over the Union Budget proposal to tax retirement savings, Finance Minister Arun Jaitley on Wednesday said, “When the debate comes up in Parliament I will give the government’s response as to what decision we finally take in this matter.”

He also stressed that the intention of the proposal is not revenue generation, but to ensure that everyone gets a pension.

“There is also a change in the law that when inheritance comes in there is no tax payable,” he said. “This was intended to incentivise people in the private sector also to use it as a kind of pension fund and to disincentive those who otherwise would indulge in consumption of that fund this move was made,” he said at the post-Budget meeting with industry associations.

He further clarified that the proposal would impact only the well-off private sector employees with high salaries and not the majority of the provident fund subscribers.

“The Revenue Department had considered various aspects of the Employees Provident Fund and the National Pension System,” he stressed.

‘Only well-off hit’ Of the 3.75 crore members of the EPFO, nearly three crore members receive monthly salaries of ₹15,000 or less and they will not be impacted by the proposal, clarified the Minister.

Jaitley in the Union Budget 2016-17 had proposed taxing 60 per cent of the withdrawals from the National Pension System, Employees’ Provident Fund and superannuation funds. Contributions after April 1, 2016 would be impacted while 40 per cent of the corpus would remain exempt.

With trade unions upset over the move, Minister of State for Labour and Employment Bandaru Dattatreya said he will also discuss the proposal with Jaitley.

“We are discussing with all stakeholders and we are in touch with the Ministry of Finance. The government will take a decision. I will personally meet the Finance Minister,” he told BusinessLine , while declining to comment if it will be rolled back.

“It is our government and rollback will be a joint decision,” he said.

Revenue Secretary Hasmukh Adhia, however, expressed surprise over opposition to the proposal and said that the exempt-exempt-tax regime is the global norm for savings.

“I am really amazed... a reform whose time has come…people are blocking,” Adhia told a post-Budget meeting organised by the Confederation of Indian Industry (CII), adding that the move was intended to create pensioned society.

“Why should educated people oppose this?” he said. The issue was also raised in the Lok Sabha with some Members raising concerns.

Related Topics