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PF rules, highway robbery & other stories

The beauty of the Union Budget presented by Finance Minister Arun Jaitley is that it is all-inclusive as there is something for everyone to complain about.

The biggest lament has come from the middle-class, which in India comprise those –- we are quoting here from the Finance Ministry’s official record –– ‘with the earning capacity below that of the Ambanis’. This would of course mean that the entire country, including all the tax departments, is middle-class.

The major talking point of the budget has been the announcement on the EPF (Employees’ Provident Fund) withdrawal, which no one is sure what it is about, but every one is unanimous that it is extremely bad. But luckily the government, quickly reacting to the larger public opinion, came out with not one but two clarifications, which left no room for any doubt that the government does not know what it is talking about. But to be fair, the government clarification did include the word EPF. This does suggest that the government seems to know what the subject is.

Anyway, rather than be critical of the government on the issue, Crank’s Corner has chosen to take the positive path to clear the ambiguities in the entire EPF setup and be a guiding light to the common public at this moment (Thursday mid-afternoon). But before we start, a small confession: Economics is not a strong subject of this column writer. But looking at the country’s economy, neither it is in the case of those who are entrusted with the actual task of managing it.

1) What is the Employees’ Provident Fund (EPF)?

Ans: This is a simple but easy financial investment instrument for the salaried class that works on the lofty socialist principle that the people who earn money should not be further burdened by the task of spending it.

In fact, all Socialist and Communist ideals are underpinned by the larger ideal that when individual people join forces as a common collective great benefit will accrue, almost always to a labour union that usually would not contribute anything to the collective. A government, in general, is mostly a larger labour union.

2) Wait, wait. You are digressing to politics. We want to know how the EPF as an investment instrument works?

Ans: If you are an employee in a company, ‘X’ rupees is carved out of your monthly salary as your compulsory contribution to the PF while the company gives ‘Y’ rupees as its mandatory share to the kitty. Using the contributions, the PF department does the most sensible thing: pay its own employees their monthly salary.

3) You are kidding, right?

Ans: Not really. I would know what the PF department actually does with my and my employer’s money if I ever manage to withdraw it. It is easier to climb Mount Everest on your backside than get your money back from your PF account.

Seriously, you are allowed to withdraw money from your PF account only for emergencies like death, preferably yours, which of course you have to prove.

And this same withdrawal policy, that is widely believed to be harder to crack than the gates of Alcatraz, has now been further tightened for a reasonable reason: The government personally hates you.

4) Forget withdrawal. We know there are issues involved in it. But people do get PF money at the time of retirement, right?

Ans: Ha, Ha. Ha. you must be the guy who thinks when the glass is full empty at least the bartender is a woman. Dude, this optimism is Rahul Gandhi sitting for ‘Mensa IQ Test’ level.

In order get your money back at the time of retirement, you have to bring the blood of virgin from an island from which no one has ever escaped alive. Okay, I am joking only. But this would seem easy to pull off than what what the Finance Ministry expects you to do, which make sense of this sentence: “it is proposed that the contributions made on or after April 1, 2016 by an employee participating in a recognised provident fund and superannuation fund, up to 40 per cent of the accumulated balance attributable to such contributions on withdrawal shall be exempt from tax. It is proposed to provide that any payment in commutation of an annuity purchased out of contributions made on or after April 1, 2016, which exceeds 40% of the annuity, shall be chargeable to tax.”

5) I get the gist that withdrawals at the time of retirement, if it can be managed at all, will now attract tax. So correct me if I am wrong here: My employer and I keep contributing month-after-month money to the government for years together, and the government after keeping the money for all those years expects me to pay it some more money as tax on the amount it has to return me?

Ans: You stole the words right out of my keyboard. But you have to love the products of socialism, they make highway robbery at knife-point respectable.

6) Thanks for the clarifications even though I can’t say they were illuminating

Ans: Never mind. I am only doing my job. And my charges are…pssst…we will do this under the table, man. This is what the PF rules generally end up encouraging.


  • Chandra maruthy

    Your column on EPF tax appeared in The UnrealTimes – With your permission, I presume. A good one. Read it in the Nanganallur Times first.

  • K Balakumar

    They wrote to me formally, got my permission and published it only after that. Thanks. And, by the way, it’s Nanganallur Talk. 🙂

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