Pension Current Affairs
The Union Finance Ministry has announced to withdraw its proposal to tax Employee Provident Fund (EPF) withdrawals.
It was announced by Union Finance Minister Arun Jaitley in the Lok Sabha clarifying NDA government’s stand on the issue. However, government has not changed its plan to tax National Pension Scheme (NPS) withdrawals.
- Earlier in the Union Budget 2016-17, Union Finance Minister Arun Jaitley had proposed to tax EPF and NPS withdrawals with an effect from 1 April 2016.
- It was announced that 60 percent of the amount deposited in EPF account of the employee would be taxed at the time of withdrawal and remaining 40 percent would be tax free.
- However, the budget proposal had provided tax exemption if the employee re-invests 60 percent of the EPF in a pension or annuity fund.
- The proposal to tax EPF and NPS withdrawals was made to create a pensioned society, especially among employees in the private sector who have no provision for pension.
What is Employee Provident Fund (EPF)?
The Employee Provident Fund (EPF) is a retirement benefit applicable only to salaried employees. It is a fund to which both the employee and employer contribute fixed amount (percent) of the former’s basic salary amount each month. This percentage is pre-set by the government. At present, the entire EPF amount is tax free at the time of withdrawal if the employee has completed five years of continuous service.
Union Government has released 2,000 crore rupees to Employees’ Pension Scheme (EPS), 1995 as its contribution for the year 2015-16.
This contribution is in addition to the 250 crore rupees contributed by the government as grant-in-aid in the EPS in order to provide minimum pension of 1,000 rupees to pensioners under the scheme.
The contribution of Union government has been calculated at a rate of 1.16 per cent of the monthly wages of the members contributing to the scheme.
In September 2015, Government had assured EPS pensioners a guaranteed minimum pension of Rs 1,000 per month. In order to meet this assurance it was necessary for the Government to infuse additional amount as grants-in- to sustain the continuance of the minimum pension.
Employers contribute nearly 8.33% of the monthly wages of the scheme members. Approximately 28 lakh pensioners including five lakh widows will get benefit from this scheme. (There are total 44 lakh pensioners).