Labour ministry leads effort for PF tax rollback

NEW DELHI: The labour ministry, leading the effort inside the government on articulating opposition to the Budget’s taxation proposals on the employees’ provident fund ( PF) scheme, has conveyed these concerns to the highest levels, officials familiar with the matter told ET.

The Budget has proposed that 60% of accumulated PF should be taxed at time of withdrawal, with the clock starting from April 1 this year (corpus accumulated before that won’t be taxed), and that employers’ contribution above Rs 1.5 lakh a year should not be tax-free.

These officials, who did not want to be identified, said there has been brainstorming sessions inside the government between various departments and employees’ grievances about their savings being taxed is now "firmly on the official agenda as a matter that needs looking into".

"The issue is under active consideration," a labour ministry official said.



The official added that a "host of suggestions are likely to be formally placed soon". "The discussions have been verbal so far. But there have been several meetings with top officials to convey the feedback we have," this official said.

Officials said the labour ministry hosted a long meeting on Thursday on the PF issue. They said arguments were marshalled against the proposal, including pointing out how PF was a source of cheap funds for the government. All central trade unions plan to go on a nationwide general strike on March 10. Bharatiya Mazdoor Sangh, a labour organisation affiliated to the RSS, has described the PF tax proposal "disgusting" and "a gross injustice to workers".

"The Budget is overall nice but one thing has spoiled it. Workers are the only honest tax payers. Why should the government tax them twice, and let corporates reap the benefits. We feel this is because those at the Centre have been misled by bureaucrats. The PM would have never wanted this," said Lakshma Reddy, vice-president, BMS.