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Trade unions oppose tax on PF withdrawals
January, 15th 2010

Central trade unions on Thursday joined hands to mount pressure on the government to shelve the new Direct Taxes Code, which proposes to tax withdrawals from savings schemes including Provident Fund.

Trade unions affiliated to the Left, right and centre conveyed their opposition to the proposal to finance minister Pranab Mukherjee during a pre-budget meeting. In a joint memorandum listing out their suggestions for the budget, trade unions said the new tax code proposed to introduce the Exempt Exempt Taxation (EET) process which means that contributions are exempted, accumulation is exempted but withdrawals are taxable.

Trade unions are particularly against taxing withdrawal on savings. Leaders of trade unions said it would affect retirement benefits and also unskilled workers. The code proposes that gross salary will include the value of leave travel concession, amount received on encashment of unavailed leave on retirement, even the superannuation benefits like compensation under voluntary retirement benefits, PF, amount of gratuity on retirement or death and amount received on commutation of pension, the memorandum said. At present, there are no taxes on these schemes.

TUs proposed that the government hold detailed discussions with them on the matter. However, the code proposes reintroduction of tax on long-term capital gains, a demand which the trade unions are also making.

TUs demanded raising the tax exemption limit (this time to Rs 2 lakh) and bringing ITEs, outsourcing sector, educational and health services run on commercial basis under the service tax net. They asked the government not to re-impose fringe benefits tax.

With food inflation levels reaching an all-time high, the trade unions demanded that the budget focus on curbing price rise. For this, they suggested strengthening of the Public Distribution System, more investment in agri sector, measures to stop forward trading, ensure that lavish bank loans for food traders are not granted and more teeth to the Essential Commodities Act.

Besides this, the trade unions wish list at the ritualistic pre-budget meeting was more or less a reinforcement of its earlier demands higher taxes on security transaction tax, enhancing wealth, corporate and gift taxes, recovery of non-performing assets and unearthing black money including the unaccounted wealth in tax havens.

They also reiterated the five demands on which all the trade unions, including Congress Intuc and RSS-affiliated BMS came together last year.

These are stopping disinvesment profit-making PSUs, steps to contain price rise, creation and protection of jobs, enforcement of labour laws and creation of a fund for the unorganised sector.

They also asked the government to extend NREGA to urban areas and provide employment for a minimum of 180 days, as recommended by the ILO.

 
 
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