All options on the controversial budget proposal to tax EPF savings, including a complete rollback, are on Prime Minister Narendra Modi's table and a decision is expected at the highest level in the government soon, senior officials told The Media on Saturday.
A senior official of the Finance Ministry conceded that the “entire" proposal was under review and the Ministry's original intent was to promote the New Pension Scheme (NPS) that had failed to take off even over 10 years after it was launched, as the EPF offered better tax benefits. “We were trying to bring some parity in [the tax treatment] of different pension funds and provident fund instruments… But the entire thing is open right now…," V. Anandarajan, Joint Secretary in the Finance Ministry dealing with direct taxes, said on Saturday.
His comments are significant as they leave out the new narratives that the Finance Ministry has introduced into the debate over the past week: only 60 per cent of the interest income from EPF savings would be taxed or the entire EPF corpus at retirement would be tax-free if an employee buys an annuity with 60 per cent of his EPF account balance.
“I don't want to comment much and muddy the waters further. Apart from parity, there was a concern that the NPS was not taking off because it was being taxed at the stage of withdrawal. Those were the concerns because of which (the tax was proposed)," he said, addressing members of the Confederation of Indian Industry at a post-budget interaction here.