×

UPSC Courses

DNA banner

DAILY NEWS ANALYSIS

  • 26 March, 2021

  • 5 Min Read

Modified tax system

Modified tax system

Introduction

  • This article analyses the amendments brought to the Finance Bill 2021 regarding taxation matters
  • Finance Minister has steered through Parliament the Finance Bill of 2021, which includes 127 amendments.

Issues with the Rs.2.5 lac per year limit

  • Responding to MPs’ concerns on the tax, she said that nearly 93% PF account holders will be covered by the ?2.5 lakh per year limit, while a mere 1% were abusing the system.
  • Yet, she introduced an amendment doubling the threshold for annual PF contributions to ?5 lakh, only for employees whose employers do not remit any contribution to their retirement fund account.
  • For the crores of Employees’ PF account holders in the private sector, this ?5 lakh threshold is a non-starter as an employer-employee relationship is an implicit requirement to open an EPF account.
  • While employees may voluntarily enhance contributions beyond the statutory wage limit of ?15,000 a month and employers are not bound to match enhanced contributions, a ‘zero employer contribution’ scenario is not possible for EPF members.
  • This suggests that only some senior government staff who joined service before 2004 and are not part of the NPS will benefit from this concession, as they contribute to the GPF account and get a defined benefit pension separately.
  • In a country with a large informal workforce and sparse social security systems, reasonable savings for retirement should not be penalised.

Increasing the cap can be a solution

  • The least the government could have done was to offer the same cap of ?5 lakh to EPF members, by including their employer contributions during the year.
  • As things stand now, annual investments into the PPF that anyone can open, are capped at ?1.5 lakh.
  • Similarly, employee PF contributions beyond ?1.5 lakh are not tax-deductible under Section 80C of the I-T Act, but income on such contributions beyond ?2.5 lakh will be taxable and employer contributions into the EPF, NPS or any superannuation pension fund are capped at ?7.5 lakh.
  • And the income on GPF contributions up to ?5 lakh would be tax-free.

Way ahead

  • To top this off, the new Wages Code will compel employers to pay higher EPF contributions by linking them to at least half of their total pay on a cost to company basis, rather than 24% of basic pay presently.
  • This will virtually force many EPF members into contributing over ?2.5 lakh a year.
  • This either reflects a lack of system-wide thinking, with two arms of the government working at cross purposes, or an ingenious ploy to stir up tax collections.
  • With doubts on the implementation of this new tax yet to be addressed, the government must consider putting it on hold and think through its implications.

Source: TH


What is Mission Indradhanush ?

Mission Indradhanush was launched in 2014 under the Ministry of Health and Family Welfare.  1. Between 2009 - 2013, only 1% coverage per year has increased. We have to make it to 5%. 2. Objectives of Mission Indradhanush: We have the aim of full coverage by 2020. Cover all those children who are either unvaccinated or are part

Mediation Bill 2021 - Detailed Overview

A Bill that could alter the Mediation landscape The background behind Mediation Bill:         In General, Disputes Became part and parcel of  Day-to-Day Life. Someone or the Other belonging to family or else not a part of the family would be fighting for something. These Disputes may be for Smaller or B

Military exercises of India

List of all Military Exercises of India 2021 Military Exercises of India with Neighbours Sampriti: India & Bangladesh Mitra Shakti: India & Sri Lanka Surya Kiran: India & Nepal Hand in Hand Exercise: India & China Ekuverin: India & Maldives Military Exercises of India with Other countries Maitree Exer

Consumer Protection Rules, 2021

Consumer Protection (Jurisdiction of the District Commission, the State Commission and the National Commission) Rules, 2021 1) Pecuniary Jurisdiction The Consumer Protection Act, 2019 The Consumer Protection Act, 2019 promulgates a three-tier quasi-judicial mechanism for redressal of consumer disputes namely district commissions, state

Swachh Bharat Mission (Urban) 2.0

The Swachh Bharat Mission - Urban (SBM-U), launched on 2nd October 2014 aims at making urban India free from open defecation and achieving 100% scientific management of municipal solid waste in 4,041 statutory towns in the country. The objectives of the mission are mentioned below: Elimination of open defecation Eradication of Manual S

Students Achievement

Search By Date

Newsletter Subscription
SMS Alerts