The government on Tuesday clarified its Budget provision on the Employee Provident Fund, saying that 60% of all contributions made after April 1 will be taxed, aside from a few exemptions.

The clarification comes after much discussion over whether it was only the interest on the EPF that would be taxed or the entire amount. The finance ministry release said that the entire EPF amount would be taxed, while adding that the finance minister was also considering feedback on the decision.

The clarification also pointed out that EPF taxes would only be levied on the "highly paid" who earn more than Rs 15,000 per month, and only if the provident fund is not used to buy an annuity. For those earning over that amount who would like to withdraw their EPF in full, the government will tax the entire EPF corpus.

This is a reversal from comments by Revenue Secretary Hasmukh Adhia earlier in the day, who said that only only the interest accrued on 60% of the contributions made after April 1 will be taxed, according to PTI.

Finance Minister Arun Jaitley’s Budget announcement had drawn outrage from trade unions and middle-class salaried workers on Monday, after he proposed to tax 60% of the provident fund corpus at the time of withdrawal. Jaitley’s announcement brought the EPF, which is a major tax-free savings option for many workers, in line with the National Pension Scheme and other pension plans, where the government has proposed a tax exemption on 40% of the corpus on withdrawal.

Adhia had also said that employees with salaries of up to Rs 15,000 a month will be exempt from the EPF tax altogether. He added that all contributions to the public provident fund will remain tax-free.

Communist Party of India (Marxist) leader Sitaram Yechury immediately criticised the government’s clarification, tweeting: “The attempt to 'clarify' the EPF ruling by MoS Finance and the Secretary show us how clueless this government is on serious matters.”