From next month, A. Balasubrahmanian, the CEO of Birla Sunlife Mutual Fund, will start putting more into equity and debt mutual funds. "The Voluntary Provident Fund is going to be taxed so I will stop putting money there and shift to mutual funds," he says.

Capital gains from equity funds and balanced schemes are tax-free after one year. The gains from debt funds are taxed at 20% after three years, but the indexation benefit reduces the tax significantly. In comparison, if the Budget proposal to tax the Provident Fund corpus created after 1 April 2016 is passed, Balasubrahmanian might have to shell out 30% tax on 60% of the corpus at the time of maturity.

Like Balasubrahmanian, millions of EPF subscribers have been forced to rethink their provident fund contributions after the Budget announced the tectonic shift in taxation of retirement benefits. Over five crore subscribers have roughly Rs 8.75 lakh crore invested in the Provident Fund. After a severe backlash from the salaried class, the government agreed to rethink the proposal. Some believe that the proposal will be watered down and only the interest accruing on on new contributions will be taxed. Others think the government will junk the idea.

These speculations have not stopped jittery employees from asking their companies to rejig their compensation structures in the coming appraisal season. "Till last year, employees used to ask for higher basic salaries so that their Provident Fund contribution is also higher. Now they are asking for other benefits instead of a higher Provident Fund," says an HR professional who works for a large telecom firm in Gurgaon.