The proposed tax on PF incomes has its logic, but operational details need a revisit
Finance Minister Nirmala Sitharaman has stressed that Budget 2021-22 raises resources to push the economy without increased taxation. However, one change to the income tax law proposed in the Finance Bill, 2021, has triggered anxieties for the salaried class: withdrawing tax exemption on interest income accrued into Provident Fund accounts arising out of employee contributions exceeding ₹2.5 lakh ‘in a previous year in that fund,’ on or after April 1, 2021. The rationale some employees are contributing huge amounts into their PF accounts and getting tax-free incomes. Subsequently, the Revenue Department has pointed out the tax will only affect a small group of ‘high net-worth individuals’ (HNIs); the 100 largest employees’ PF (EPF) accounts had a combined balance of over ₹2,000 crore. It can be no one’s case that a social security scheme for formal sector workers should become an