Govt mulls increase in tax-free PF withdrawal limit

NEW DELHI: In a move that could bring relief to employees, the government is looking at ways to increase the limit of provident fund (PF) money that can be withdrawn without attracting tax.

Sources say the labour ministry has written to the finance ministry to increase the exemption limit from Rs 30,000 to Rs 2 lakh.

The employees’ provident fund organisation (EPFO), in a notification last week, said it would deduct TDS from June 1 on PF withdrawals where accumulations were over Rs 30,000 and the employee had worked for less than five years.

“The move to increase the withdrawal limit is in the interest of the poor who withdraw money for various emergencies and it will ensure they are not taxed for withdrawing their own money,” a senior labour ministry official said.

Trade unions, including the RSS- affiliated Bharatiya Mazdoor Sangh, have opposed the EPFO notification saying the move is anti- worker and threatened a stir if it is not withdrawn.

The unions have argued that workers should not be penalised for withdrawing their own money which they use for emergencies.

Union finance minister Arun Jaitley had proposed TDS on premature withdrawal of PF money in the budget earlier this year. The move was aimed at discouraging withdrawal of money meant for retirement.