Presenting the Union Budget for 2016-17, Union Finance Minister Arun Jaitley had proposed to tax withdrawal of 60 per cent of accumulations in the EPF after April 1, 2016. The government has rolled back the Budget proposal to tax Employees’ Provident Fund or EPF withdrawal after facing intense criticism from all quarters. Speaking in the Lok Sabha, Finance Minister Arun Jaitley said that the government will be reviewing the proposal.

Congress vice-president Rahul Gandhi claimed that it was his tough stance over the issue which forced the government to announce a roll back of the widely criticised move.

As per the proposal 60 percent of the amount deposited in the EPF account of the employee would be taxable at the time of withdrawal, and 40 percent would be tax free. This proposal would have become effective from 1 April 2016.

It also said that if the employee re-invested 60 percent of the EPF in an annuity or pension fund then it will not be taxed. At present, the entire amount is tax free at the time of withdrawal if the employee has completed five years of continuous service.

The EPF is a retirement benefit scheme for salaried employees. Any company with over 20 employees is required by law to register with the Employees’ Provident Fund Organisation (EPFO).