The Budget provision has been introduced to remove disparity among contributors
As much as Rs 62,500 crore has accumulated as provident fund of some 1.23 lakh high net-worth individuals (HNIs) in the retirement fund corpus for 2018-19, with a staggering Rs 103 crore accumulating in the account of the highest contributor, sources said on Thursday.
The Budget 2021-22 has removed the tax exemption status to interest accrued on investments in employees provident fund (EPF) exceeding Rs 2.50 lakh per annum.
The sources in the revenue department said there are a total 4.5 crore contributors in the Employees' Provident Fund Organisation (EPFO) account. Out of these, more than 1.23 lakh accounts are of the HNIs who contribute monthly huge sums to their EPF accounts.
"Their total contribution is to the tune of Rs 62,500 crore for 2018-19, and the government is owing or paying an assured interest at the rate of 8 per cent with tax exemptions to these very high income category persons at the cost of honest low- and middle-income, salaried class and other taxpayers," said one of the sources justifying the need for taxing such high interest earners.
The sources said one of the highest contributors has more than Rs 103 crore in his account, followed by two second-highest ones having more than Rs 86 crore each. The top-20 HNIs have about Rs 825 crore in their accounts, while top-100 HNI contributors have more than Rs 2,000 crore.
The Budget provision has been introduced to remove disparity among contributors and to ensure that the HNIs who park huge sums of money to misuse and game the provision of assured high interest are checked and do not distortedly earn at the cost of other honest taxpayers' money, said the sources.
The sources also said that these HNI contributors, who are 0.27 per cent of the total number of EPF account holders, have on an average a corpus of Rs 5.92 crore per person. Thereby, they were earning a very huge sum at the rate of Rs 50.3 lakh per such person per annum as tax-free assured interest at the cost of the salaried class and other taxpayers, the sources added.
They said the decision to remove the tax exemption on provident fund contributions of Rs 2.5 lakh and above in the Budget was based on the principle of equity among the contributors. Average normal EPF or GPF contributors would not be affected by the removal of anomaly in the system, the sources added.