Finance Minister hints at a review of tax limit on EPF

No plan to merge the EPF with NPS, says Nirmala Sitharaman
No plan to merge the EPF with NPS, says Nirmala Sitharaman

Finance Minister Nirmala Sitharaman has commented that there is no intent to discourage higher income earners from saving with the Employees Provident Fund (EPF) and that she was open to reviewing the contribution limit of ₹2.5 lakh a year for tax-free interest, imposed in the recent Union Budget.

Reiterating that the EPF will continue to remain in its present form, the Minister said there was no plan to merge the EPF with the National Pension Scheme.

Also learn- For rich/affluent, EPF is not a nest egg but a goose that lays golden eggs.

“We want to continue with the EPF. We understand that there is a certain comfort with people, particularly middle-income earners when they are assured of a return,” she mentioned in an exclusive interview with Business Line.

“We have taken a call not to discourage those earning more than ₹15,000 from being part of EPF,” she added.

There can always be a discussion on the ₹2.5 lakh limit. I can go back and review it. But it is a matter of principle. We are only touching those who are putting far more than what an average Indian’s earnings are per month,” FM added.

Also read | Petrol price is a serious issue: Nirmala Sitharaman

The Finance Minister has proposed in the budget to tax interest earned on EPF contribution of more than ₹2,50,000 annually.

Realistic numbers

FM said that the numbers in the Budget are realistic, both in terms of prospect and in what can be achieved. “Every number has been repeatedly vetted for being achievable. This can be a Price range that has been put by the wringer repeatedly to get it nearer to what’s achievable,” FM mentioned.

Asked if the disinvestment target of ₹1,75,000 crore is too modest, she replied that it could appear to be so. “But I would rather be cautious than stand up and say later that I went wrong,” she said.

The Finance Minister confirmed that no decision had been made yet on which banks to privatize — the profit-making banks, smaller banks, or big ones. In the context of the proposal to launch development financial institutions (DFI), she said the idea was that long-term infrastructure funding will be done by these institutions.

“Banks must focus on the primary business of lending for commercial purposes, rather than getting choked by sourcing short-term deposits and lending to long-term projects. There should be a marked difference between the portfolios of DFIs and commercial banks,” she said, adding that the DFI idea will be implemented “as soon as possible”.

Levies/Duties on fuel

Asked why the Centre was not reducing excise duty on petrol and diesel despite the sharp climb in their retail prices, Ms. Sitharaman said the Center and States ought to sit together and perceive how best to deal with the issue. “Taking into GST can be a choice.

That will positively carry it to one rate everywhere in the country. The GST Council can think and take a position on it, yet at that point, the truth of the matter is, it is both the Center and States even then, at the end of the day,” she said.

“Jugaad” ideology

Noting an inquiry on whether the Prime Minister’s speech in Parliament safeguarding wealth creators represents a shift within the authorities’ philosophy.

Ms. Sitharaman said the central government was never far removed from the BJP’s economic ideology.

“This country had gone excessively far in reiterating a socialist and what I would call an imported jugaad philosophy made from tweaking imported ideas and constantly adding to them with the expectation that they would by one way or another fit the country,” she said.

“There also needs to be a recognition that socialism is not the only ideology that has a copyright on welfare. When the economy does not do well and wealth isn’t generated, then social good suffers and so does the welfare state. We are trying to reinforce that lawfully earning money is not wrong.

A tax regime that is not oppressive or adversarial can generate sufficient revenues to fund welfare,” she added.

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