Facing all around attack, Finance Minister Arun Jaitley on Tuesday withdrew his Budget proposal to tax employees' provident fund (EPF) at withdrawal.
"In view of representations received, the government would like to do a comprehensive review of this proposal and therefore I withdraw the proposal," Jaitley said in a suo motu statement in Lok Sabha.
He however stated that 40% exemption given to National Pension Scheme (NPS) subscriber at the time of withdrawal remains.
The proposal had come under attack from parties, unions and other stakeholders, stepping up pressure on the Centre.
The issue was discussed at a high-level meeting between officials of the Prime Minister's Office (PMO) and the Finance Ministry on 3 March.
Jaitley in his Budget for 2016-17 had proposed that 60% of the withdrawal on contribution to employee PF made after April 1 this year will be subject to tax. This would apply to superannuation funds and recognised provident funds including EPF.
The proposal would not have impacted 3.26 crore EPFO subscribers drawing statutory wage of upto Rs 15,000 per month. Employees Provident Fund Organisation (EPFO) has a total subscriber base of 3.7 crore.
Stepping up pressure on the Centre, Rahul Gandhi had on Saturday said he will continue to fight till it rolls back the proposal for levying tax on EPF withdrawals.