NEW DELHI: Amid criticism over the proposed tax changes for those contributing over Rs 2.5 lakh annually towards provident fund (PF), the government on Thursday said 1.2 lakh subscribers – which is less than 0.3% of the 4.5-crore base – were contributing “huge sums”.
Official sources suggested the benefit of high tax-free returns was accruing to high net worth individuals (HNIs) although PF was meant for workers. Among the HNIs, one individual with a balance of Rs 103 crore in his PF account has the highest corpus, followed by one holding Rs 86 crore.
Sources said that the top 20 HNIs have about Rs 825 crore in their accounts, while the top 100 have a balance of over Rs 2,000 crore.
Overall, HNI account holders had an average corpus of Rs 5.9 crore. They had average earnings of Rs 50.3 lakh annually – and tax-free under the current dispensation. In all, there are around 4.5 crore employees provident fund contributors and the high net worth individuals chip in with about Rs 62,500 crore to the provident fund kitty, a finance ministry source said.
“The government has done away with this disparity of paying huge sum of tax-free interest to HNIs at the cost of honest average salaried class contributor and taxpayers,” an official argued, justifying the tax proposal in the Budget.
The government has argued that a normal subscriber of EPF or General PF for government employees will not be affected by the removal of “anomaly” in the system.