The government has withdrawn the Budget 2016 - 17 proposal to tax employees' provident fund (EPF) withdrawals realising the legitimate concerns voiced by many people, Minister of State for Finance Jayant Sinha said on Tuesday.
"We realised that other than looking at something that would guide people towards retirement income, it actually resulted in a situation where lots of people felt 60 percent of the corpus of EPF that was restricted in terms of withdrawal was taking flexibility away from their own retirement plan which was a very legitimate concern that has come up, " Sinha said at an event here organised by Federation of Indian Chambers of Commerce and Industry (FICCI).
"I want to assure, everyone who is saving for retirement that government is on your side, the government wants to work with you, and it wants to provide you incentives and the opportunities. . that's why we have modified EPF now, " he said.
"The objective of proposal to tax the employees' provident fund at the time of withdrawals was never ever to raise tax revenues, " he said, adding the aim was to provide "further benefits to the salaried class as far as pension was concerned".
Finance Minister Arun Jaitley on Tuesday said the government was withdrawing 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. He also withdrew his budget plan to limit monetary contributions made by an employer in a recognised provident or a superannuating fund to Rs. 150, 000 per annum to avail tax sops.
However, the 40 percent tax exemption limit on the national pension scheme stays, Jaitley said.
Sinha also said the budget simplifies and rationalises the tax system through a Rs. 2 crore limit for the Presumptive Taxation Scheme, abolishing 13 cesses and setting a time limit of one year for disposing petitions seeking waiver of interest and penalty.
"There is a commitment to not resort to retrospective taxation, relief to small tax payers is provided for and incentivise Make in India, affordable housing, and moving towards a pensioned society, " he said.
Meanwhile, in a statement here on Tuesday, FICCI welcomed the move to withdraw the EPF tax proposal and lauded the government for responding to public concerns "in such a swift manner".