Tax on 60% EPF withdrawal not inappropriate

Not surprisingly, there is huge protest from the organized class of employees at all levels about the proposed tax on 60% EPF withdrawal. However, careful and responsible introspection of the scenario would make one conclude that such tax is not really inappropriate.

Of the working population in the country , around 5% belong to the organized sector and around 95% belong to unorganized sector. Amongst the unorganized sector, more than 50% are involved in agricultural related activity. In the unorganized class, 30% of the people belong to lower income group not knowing as to from where the next meal would come from.

Therefore, the above tax has implications only for organized class, who constitute just around 5% of the national working population.

It is certainly appropriate to consider the organized class as comparatively privileged class of the society. Their salary and income are constantly increased by pay revisions, allowances in tune with the cost of living index etc. By constantly raising their demand for pay increase and resorting to coercive steps like strike and go slow in the name of trade union rights, the organized class have reasonably good income and they should be considered as belonging to middle or upper middle income group.

The ground reality is that chunk of the expenditure of the employers (both government and private ) are spent towards salaries and perks for the employees.

For example, the recent 7th pay commission would involve an additional expense for the central government to the tune of more than Rs.One lakh crore.

All state governments have now to increase the salaries and perks for their employees because of their demand, consequent to the pay increase for central government employees. This will amount to several crores of rupees. To the extent that such expenses are incurred by the central and state governments towards payment of salaries and perks to the employees, the money available with the governments to spend for the welfare and progress of 95% of the unorganized class will become less.

Obviously, organized class reap the benefits at the cost of unorganized class to some extent. In such circumstances, one can say that the organised class is morally indebted to unorganized class..
It should be further kept in mind that all government employees get life long pension after retirement which pension amount are constantly raised in tune with the cost of living index and pay revision from time to time . Further,in the unfortunate event of the death of the retired government employee, family pension is also provided.

At the time of retirement, if the organized class has to pay tax once on the retirement benefit that they get, which money will be available for the government to spend for the betterment of the unorganized working class , substantial section of whom are in deprived and downtrodden condition, it only amount to “paying the debt” due to the unorganized brethren of the country.

What the organized class have got to complain ?

Nandini Voice For The Deprived more  

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Mr.Prjapathy you are being very illogical in comparing organised sector salary earner with rickshawalas. How naive if you expect them to pay income tax. Do you know their total earning is less than your house rent allowance. In your argument to justify your stand against EPF tax do not go overboard. At any given point of time pension system is more sustainable and followed all over the world. Any government should look at the welfare of 95% working class and not at 5% who will marginally suffer. Everywhere people yearn their money in hard way only. Infact we should pressurise the government to use these taxes for the welfare of all the people including the taxpayers. more  
Mr Prajith P S is fully justified his stand against taxing on 60% EPF withdrawal. People are poor in unorganised sector more for their own doings rather than any other reason more so in urban areas.where they get well paid for the job they do but spent a good amount on drinking, smoking, gambling etc. However poor in rural areas remain poor mostly for reasons beyond their control. For instance farmers are poor because of their dependence on rain God. Even in rural areas liquor is a big factor in keeping the people below the poverty line. more  
Be realistic please. This is more like claiming that women have the privilege of bearing a child, so let us FORCE them to impregnate to maintain the population of a nation. What is this nonsense?? The claim that the "organized class reap the benefits at the cost of unorganized class to some extent" is baseless. The organised class is helping the unorganised class by sharing a portion of their income. We buy from local markets, take rickshaws, have a tea\chat from a roadside vendor etc. Who do you think injects this money into the market? 1. I pay my Income Tax + different cess + surcharges. : Un-organised sector does not 2. I pay sales tax\customs\excise on any product bought from the market : Un-organised sector can pay it from the extra 30% which they save by not paying taxes. Moreover, they hold BPL cards which help them get the groceries are zero or nominal rates. 3. I pay property tax : Un-organised sector can pay it from the extra 30% which they save by not paying taxes 4. I pay registration fees and stamp duty when I buy property : Un-organised sector will not show the complete value of the property and evade the load of taxation, where I need to show the complete value which is needed to get me a loan. 5. I pay service charges for any service which I take (utilities\transport\rent etc) : Un-organised sector can pay it from the extra 30% which they save by not paying taxes 6. I pay for my kids' education : Un-organised sector can pay it from the extra 30% which they save by not paying taxes. Most of them get free education, books, clothes etc. 7. I pay for insurance coverage for my family : Govt pay it for the unorganised sector 8. I pay my family's medical bills : Govt offer this for free to the unorganised sector 9. I am part of an NGO to support the poor and suffering : Almost none from the unorganised sector does it at a scale which we are doing. All of these are paid by organised sector is from THEIR HARD EARNED MONEY. I did not evade paying taxes like most of the unorganised sectors do. Have not heard a rickshaw-wallah \ road side vendor \ bunker shop guys \ house keeping workers \ farmers \ small scale industry employees \ small logistics vendors \ fisherman or the seller \ pastors who are into the business of religious conversions \ small scale online workers or many like them talk about paying taxes. My parents were not rich. But they insisted on our education. I studied in normal schools in local medium(language). NOBODY from the Unorganised Sector OR GOVERNMENT, HELPED ME to clear exams or get a job. There are millions like me who struggled in their life, dedicated more than 14~18hrs daily to learn, work and be where we are today. GOVT SHOULD STOP FLEECING US for every darn thing. The taxes that we pay is way more than what I get back from the society. If Govt have the courage, should bring back the black money and create a robust mechanism to collect taxes from the unorganised sector too. more  
I think the proposal has not been thoroughly discussed and various justifications have been projected including that 90% employees are below 15000.00 limit, some times only interest is being taxed and many more stories. Govt. should not target the retirement funds at all and by selective choice. The Govt. had given long term commitment on such funds and it would be unwise to go against such commitment by change of Govt. Though I am not effected part as I am retired person but one should have compassion for the poor people serving for their survival and managing their children, parents ,social obligations , housing needs, medical etc. One need to be among the masses to think for the masses. there have been increase in service tax about 25% in two years, looking for opportunities to increase the taxes. Govt. should exemplify good governance by improved tax collection reflected by reducing the already heavy taxation regime and not compare with other counties which provide equivalent infrastructure and facilities. Govt. would do well by reducing the freebies to elite class in the form of free travel , security, communication ,housing, medical which a poor man cannot even dream. Nakul RC more  
You have given good justification in favor, I agree with most. But it's unfortunately true that the 'populism' factor (although not correct always) has to be paid some weight age in our country. We are still an immature country, where very few people read and write, among them not too many want to think, even out of those who do, many are pseudo intellectuals and pseudo liberals with extremely biased opinion. So one has to be able to deal with these dynamics as well. One other factor in favor of this is in the unorganized sector, as well as in the organized, people at old ages fall prey to the soft and emotional money extortion by their own children thereby loosing all the life's savings and means of livelihood. If some portion is kept under NPS they will keep getting the pension life long (their importance with their children will not reduce, as they will not still have their fund). I am not saying this situation is true for all, but this does happen in life, however difficult, it might be to accept. more  
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