New Delhi, Mar 8: The rollback of the controversial EPF tax proposal is a step in the right direction and will bring welcome relief to the salaried class, say tax experts.
"A roll back in the provident fund amendment is a step in the right direction and once again demonstrates the commitment of the government to a consultative process and its willingness to listen," KPMG India Head (Tax) Girish Vanvari said.
Making a suo motu statement in Parliament, Finance Minister Arun Jaitley also withdrew the Budget proposal of taxing employer's contribution to provident and superannuation fund (SAF) beyond Rs 1.5 lakh.
"Responding to the voice raised by the entire middle class, the Finance Minister has rolled back the proposal.... Withdrawal of the proposal comes as a relief to the middle class who is once again free to use their retirement savings as they wished," Nangia & Co executive Director Neha Malhotra said.
"Freedom to use retirement savings is of paramount importance to salaried group, which is created to take care of their sunset years," Malhotra added.
Sonu Iyer, Tax Partner & Leader - People Advisory Services, EY, said the decision to withdraw proposal will bring cheer to many existing and prospective subscribers. With the rollback of budget announcements, EPF will continue to be an attractive investment option with an EEE scheme. Exempt in all three stages of EPF - contribution, interest as well as withdrawal.
"The icing on the cake is that the exemption provided for 40 per cent withdrawal from the NPS corpus still remains. The NPS scheme would hence now move from a EET scheme to a partially exempt scheme at the time of withdrawal, making this more attractive," said Tapati Ghose, Partner, Deloitte Haskins & Sells LLP.
Industry chamber Assocham too welcomed the announcement and said EPF serves as the most important social security provision for middle class to meet unforeseen expenditure and provides financial security post-retirement.