India drops pension tax plan after backlash

New Delhi

PRIME Minister Narendra Modi's government on Tuesday dropped a controversial proposal to tax pension withdrawals, caving in after an outcry by salaried workers threatened to undermine his party's prospects in upcoming Indian state elections.

Finance Minister Arun Jaitley had proposed in his Feb 29 budget taxing lump-sum withdrawals exceeding 40 per cent of an individual's retirement pot in the Employees' Provident Fund (EPF), unless the sum is reinvested in an annuity.