Budget 2016: As BJP weighs political fallout, Arun Jaitley to clarify the EPF taxation move in Parliament

NEW DELHI: Finance minister Arun Jaitley will formally calm the nerves over taxation on withdrawal of EPF corpus, in Parliament during a discussion on the budget, top party sources indicated.

While part of the contours of arguments were spelled out by Jaitley during his briefing to party MPs early on Tuesday morning, later in the day the finance ministry came out with a clarification indicating the government intends to tax only the returns on the 60% of the corpus and not the amount contributed by the private sector employees in case of withdrawals beyond 40%.

“Jaitley explained that the move was aimed at incentivising private sector workers towards pensions,” confided a source present during the NDA parliamentary party meeting.

Top party leaders indicated Jaitley would formally announce that the EPF contributions of employers will not be taxed and only the returns on their contribution will be taxed when 60% of the corpus is not used for pension products.

A strong section of the ruling party establishment appeared confused about the move, with most of them showing greater propensity to side with the private sector employees. “I am with private sector workers,” confided a senior BJP leader.

NDA alliance partner Shiva Sena, too, suggested its sympathy for the private sector workers enrolled with the EPFO. “Shiv Sena is with the interests of workers,” Shiv Sena leader Sanjay Raut told reporters in Parliament House complex.

The tone for it was set within the ruling establishment on Monday itself when RSS affiliated trade union — Bharatiya Mazdoor Sangh (BMS) — criticised the move. “The proposal to tax withdrawals beyond 40% is unfortunate,” BMS, the largest trade union in the country, said.

Even as the ruling establishment weighed the political fallout of the move which hits the salaried workers engaged in the private sector, considered a BJP catchment, the senior party leaders indicated that the clarifications issued by the finance ministry should address the concerns.

“The emphasis is on discouraging conspicuous consumption from the EPF corpus by taxing returns on withdrawals beyond 40%.”