Trade unions oppose taxing of savings, PF withdrawals

The draft direct tax code, on which the government has invited comments from the public, has argued for bringing the entire range of savings schemes under the EET mode of taxation

Trade unions have asked the Indian government to shelve the proposal in the draft Direct Tax Code (DTC) to tax all savings and provident fund (PF) schemes at the time of withdrawal, saying that the move would hit the salaried class hard, reports PTI.

"This effort of bringing PF withdrawals under income-tax purview shall adversely hit the salaried class as their social security will be seriously hampered. This is just not acceptable," said the Hind Mazdoor Sabha (HMS), in a letter to finance minister Pranab Mukherjee.

Cautioning the government that implementation of the proposal could create a 'serious situation', the HMS appealed to the finance minister “not to open a confrontational front.”

The secretary of the All India Trade Union Congress, DL Sachdev, also raised concerns about the proposal and said that the Union would take up the issue with the government.

The draft DTC, on which the government has invited comments from the public, has argued for bringing all savings schemes under the exempt, exempt, tax (EET) mode of taxation.

At present, no income-tax is levied either at the time of contribution, accrual of interest, or withdrawal of provident funds by subscribers.

The EET mode would cover retirement funds, including General Provident Fund (GPF), Public Provident Fund (PPF), Recognised Provident Fund (RPF) and Employees' Provident Fund (EPF).

"During a meeting of the working committee of the HMS on 31st October, a resolution was passed to oppose the government's move to bring PF under income-tax purview,” said AD Nagpal, secretary, Hind Mazdoor Sabha, in a statement to PTI.

"We oppose this proposal as this would hit the salaried class of the society badly. Subscriptions to PF schemes are mandatory and not voluntary. Thus the government should not charge income-tax on withdrawals of PFs before or after superannuation," he said.

Mr Sachdev, who is also an Employees’ Provident Fund Organisation's (EPFO) trustee, said, "We will raise this issue in the next meeting of EPFO's apex body, Central Board of Trustees, which is headed by the labour minister."

"We will spare no efforts to get this resolution passed in the CBT that trustees don't favour charging of income-tax on PF withdrawals,” Mr Sachdev said, adding that a letter opposing the proposal would be sent to the labour minister as well as the finance minister.

The issue, Mr Sachdev said, is likely to rock pre-budget consultations of the finance minister with the unions.

All central trade unions would stage a dharna in front of Parliament House on 16th December, he added.

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