by admin | May 25, 2021 | Corporate, Corporate Buzz
New Delhi : (IANS) Finance Minister Arun Jaitley on Tuesday said the government was withdrawing one of the much-resisted budget proposals to partially tax withdrawals from the employees’ provident fund accounts.
“A number of representations have been received from various sections of the society, including members of parliament, suggesting that this change will force people to invest in anuity products even if they are not willing to do so,” Jaitley told the Lok Sabha.
“The main argument is that employees should have the choice of where to invest. Theoretically, such freedom is desirable, but it is important for the government to achieve policy objectives by instrumentality of taxation,” he said.
“In the present reform, the policy objective is not to get more revenues but to encourage to join the pension scheme,” Jaitley said, adding the proposal he listed in paragraph 138 and 139 of his budget speech was being “withdrawn” to enable a “comprehensive” review.
“The proposal for giving 40 percent exemption given to NPS (National Pension Scheme) subscribers at the time of withdrawal remains.”
Para 138 of his speech said: “In case of superannuation funds and recognised provident funds, including EPF, the same norm of 40 percent of corpus to be tax free will apply in respect of corpus created out of contributions made after April 1, 2016.”
Para 139 said: “Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases. Also, we are proposing a monetary limit for contribution of employer in recognized provident and superannuation Fund of Rs.1.5 lakh per annum for taking tax benefit.”
by admin | May 25, 2021 | Economy, Employment, News
New Delhi : (IANS) Addressing the strong reaction provoked by the Budget 2016-17 proposal on tax treatment of provident fund contributions, Finance minister Arun Jaitley on Wednesday said he would announce the final decision on the matter when he replies to the debate on the Budget in parliament.
“Now there has been some reactions. When the debate comes up in parliament, I will give the government’s response as to what decision we finally take in this matter,” Jaitley told representatives of industry associations FICCI, CII and Assocham at a post-Budget 2016-17 meeting here.
In his budget speech on Monday, Jaitley said that 60 percent of withdrawals from the provident fund accounts will be taxed on contributions to be made after April 1.
The finance minister said the aim of the move is to make India a more insured and pensioned society.
“The revenue department had considered various aspects of the National Pension Scheme and Employee Provident Fund Organisation (EPFO). Their intention is not revenue raising, that was not the principal intention,” he said.
“The EPFO has about 3.7 crore members, of which about 3 crore members are those in the earning category of Rs.15,000 and below. For them, there is no change. It is only those private sector employees who have just joined that this will impact them,” he added.
With confusion created over whether only the interest will be taxed upon withdrawal, or the whole corpus itself built after April 1 this year, a finance ministry release on Tuesday said: “We have received representations today from various sections suggesting if the amount of 60 percent of corpus is not invested in annuity products, tax should be levied only on the accumulated returns of the corpus and not on the contributed amount.”
“We have also received representations asking for not having any monetary limit on employer contribution under EPF because such limit is not there in NPS. The finance minister would be considering these suggestions and taking a view on it in due course,” it added.
Meanwhile, platform for social change Change.org said in a release here on Wednesday that over one lakh people have supported a campaign started on their website on the EPFO issue.
A petition asking the ministry to withdraw the decision “went viral within two days and over one lakh people have expressed their outrage on this Change.org petition,” it said.
by admin | May 25, 2021 | Economy, News
New Delhi (IANS) Adding further confusion over tax treatment of provident fund contributions proposed in the UNion Budget, the finance ministry on Tuesday said a final view was yet to be taken on the subject.
In a statement, the ministry said on members of the provident fund who invest their withdrawals in annuity funds, no tax will be levied. If not, 60 percent of the money withdrawn will be taxed. Thus far, it is clear.
But what has created confusion is over whether only the interest component will be taxed upon withdrawal or the whole corpus itself built after April 1 this year. Revenue Secretary Hasmukh Adhia had alluded that only interest will be taxed and not the corpus.
But a statement thereafter suggests no firm decision has been taken as yet.
“We have received representations today from various sections suggesting if the amount of 60 percent of corpus is not invested in annuity products, tax should be levied only on the accumulated returns of the corpus and not on the contributed amount,” it said.
“We have also received representations asking for not having any monetary limit on employer contribution under EPF because such limit is not there in NPS. The Finance Minister would be considering these suggestions and taking a view on it in due course.”
The salaried class was shocked by Monday’s budget proposal presented by Finance Minister Arun Jaitley that seemed to suggest that 60 percent of withdrawals from the provident fund accounts will be taxed — that, too, with retrospective effect.
Jaitley said 40 percent of the National Pension Scheme (NPS) corpus would be tax-exempt at the time of withdrawal to make it attractive for the savers. He said the annuity fund, which goes to legal heirs, also won’t be taxable.
In case of superannuation funds and recognised provident funds, the same norm of 40 percent of corpus to be tax-free will apply in respect of corpus created out of the contributions made on or from April 1, the minister added.
He said the government was also proposing a monetary limit for the contributions of employer in recognised provident and superannuation fund at Rs.150,000 per annum for taking the tax benefit.
The service tax on single premium annuity policies had been reduced to 1.4 percent from 3.5 percent of the premium paid in certain cases.
Similarly, Jaitley also announced exemption of service tax for annuity services provided by NPS and services provided by Employees Provident Fund Organisation (EPFO).
The earlier clarification from Adhia seems to have come due to the uproar against the government’s proposal. But the ministry statement has clearly said the matter was not closed as yet.
“The Finance Bill does not reflect Adhia’s clarification. Perhaps the government may change the relevant provisions,” Neha Malhotra, executive director of Nangia and Company, an international tax advisory and accounting firm, told IANS.
