Published On: Tue, Mar 1st, 2016

Jaitley’s budget disappoints salaried class

New Delhi: The third general budget of the Narendra Modi government tabled in the Parliament on Monday, offered nothing to cheer up the salaried class.

Finance Minister Arun Jaitley addressing a Post Budget Press Conference on Monday.

Finance Minister Arun Jaitley addressing a Post Budget Press Conference on Monday.

Finance Minister Arun Jaitley proposes to levy income tax on upto 60 per cent of provident fund withdrawals from April 1, 2016 in his budget, a move that will disappoint nearly six crore salaried class who have described the decision as “anti-people.”

Currently, withdrawals from withdrawals from Employee Provident Fund are completely exempt from income tax after five years of continuous service, but after April 1, employees will have to pay income tax on 60 per cent of the amount they withdraw from the fund. The remaining 40 per cent will be tax free.

The government employees as well as private sector employees have expressed displeasure over Jaitley’s move.

“Provident fund is our hardearned income, which he uses for emergency. Taxing it is akin to snatching the hard-earned ​cash of the poor. The government’s decision will hit us very hard,” said a nationalized bank employee.

“The government has adopted anti-employees policy by taxing provident fund withdrawals. The decision-makers should have lowered the tax amount but the hike is too steep,” said a railway employee.

Most of the salaried people said they wanted to use the savings to fund their children’s education and wedding, but the latest measure will hit them hard.

“I want to utilise the amount for my daughter’s wedding, but my provident fund would be taxed heavily,” said an employee of a private bank.

Explaining the move to tax provident fund withdrawal, Minister of State for Finance Jayant Sinha said, “If you take out the 60 per cent and want to consume it in one year, you will have to pay tax because effectively you are defeating the purpose of the pension scheme.”

Congress leader Shashi Tharoor countered the minister. “People don’t take out provident fund money to put it into an annuity, they take it out because they need it,” he said.

Analysts said that this step is aimed at encouraging the salaried to remain invested in the retirement fund and later invest the kitty in annuity (pension) products to earn regular income.

The Budget has also left a pale look on the faces of salaried class as the most eagerly awaited rebate in income tax remained a distant dream for them as the income tax slab was not enhanced.

However, Jaitley raised Income Tax relief on House Rent Allowance (HRA) Rs 24,000 per annum to Rs 60,000 per annum for salaried class people, who earn upto Rs 5 lakh per annum.

He also gave a income tax relief of Rs 5,000, as compared to Rs 2,000 previously, the salaried class people, who earning up to Rs 5 lakh a year.

TST

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