Labour Minister Bandaru Dattatreya may demand a rollback of a proposal to tax partial Employees’ Provident Fund (EPF) savings at the time of withdrawal, government sources said.
Even as the Finance Ministry issued a detailed clarification about the proposed change on Tuesday, a government official said the labour minister in the next few days will push Finance Minister Arun Jaitley to withdraw the plan in totality. It is learnt that Mr. Dattatreya has also sought a meeting with Prime Minister Narendra Modi after central trade unions and workers across the country protested the government’s announcement made in the Union Budget.
Mr. Jaitley had announced that 60 per cent of the EPF savings will be taxable at the time of withdrawal.
On Tuesday, Labour Ministry officials took up the matter with the Finance Ministry and apprised them of the impact of the move, a government official said. “This will be a huge dent on the savings of young professionals. The amount that will be contributed towards EPF today will be withdrawn after two decades and this will translate into huge tax burden,” the official said.
“The Finance Ministry is trying hard to bring National Pension System and EPF on same pedestal not realising both of them are not comparable. Also, why force employees to place their EPF corpus in annuity instead of allowing them to withdraw in full?” another official said.
The move came as a surprise to many in the labour ministry who claimed that there was no consultation on this proposal with both the Labour Ministry and the Employees’ Provident Fund Organisation (EPFO) in the pre-Budget meetings.
At present, EPFO has 3.7 crore active members, out of which three crore people contribute compulsorily, according to the Finance Ministry.