A salaried employee wishes to buy a flat costing Rs. 10 Lakhs. Therefore, he would either opt for a house loan paying huge interest rates or go for an advance/withdrawal from PF, but that's a long procedure.
Rather than opting for the archaic EPFO (Employees Provident Fund Organisation) and waiting ages for PF proceeds, one can withdraw money from his PF account in a couple of days. This is just one of the many advantages of an exempted PF trust. Let's explore other ways in which this trust surpasses the EPF supervised by regional PF commissioners.
When you join any provident fund, you automatically make regular, mandatory, tax-qualified, defined contributions that accumulate until you retire. You contribute 12 percent of your basic pay, and your employer matches this amount.
"With no social security available, this instrument enables employees to build a corpus to see them through tough times between jobs—as the amount can be partly withdrawn as a loan—and finally after retirement."
The PF is an essential part of any financial plan. How you handle it will significantly impact your financial goals, especially long-term goals.
There are three options to be part of a PF:
- Save in an unexempt fund like the EPF under the EPFO.
- Invest in a company-run exempt fund recognized by the EPFO, paying at least the same interest as the EPF.
- Put your money in a company-run excluded fund, not EPFO regulated but set up with approval from the resident income tax commissioner, looking after all investments and fund management itself and self-regulated.
If you work in an organization with over 20 employees, the company must comply with the PF Act by being part of an exempt or unexempt PF trust.
Apart from returns, the ability for a contributor to access their savings in the fund is crucial. The EPFO often struggles with addressing service glitches, whereas employees prefer the more friendly and responsive company-run exempt trusts.
Are non-RPFC trusts better?
Employers and employees prefer trust managers outside the RPFC due to superior service levels. Though exempted funds must match EPF returns, they are better managed and have sometimes earned better returns.
What do employees gain from trusts not part of the EPFO?
Setting up the EPFO aims to protect employees' future through contributions today. However, accessing PF savings for financial obligations can be challenging with the EPFO but expedited through company-run trusts.
Why aren't more forming their own trusts?
In the past seven years, few organizations have obtained exempted status due to the dual role of the EPFO as regulator and administrator. Managing an exempt trust is less expensive, making it preferable for organizations and employees. Bringing existing exempted trusts under the EPFO's ambit could increase its deficit.
Warm regards,
Umesh Chaudhary
welcomeumesh@yahoo.com
From India, Delhi
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141Rather than opting for the archaic EPFO (Employees Provident Fund Organisation) and waiting ages for PF proceeds, one can withdraw money from his PF account in a couple of days. This is just one of the many advantages of an exempted PF trust. Let's explore other ways in which this trust surpasses the EPF supervised by regional PF commissioners.
When you join any provident fund, you automatically make regular, mandatory, tax-qualified, defined contributions that accumulate until you retire. You contribute 12 percent of your basic pay, and your employer matches this amount.
"With no social security available, this instrument enables employees to build a corpus to see them through tough times between jobs—as the amount can be partly withdrawn as a loan—and finally after retirement."
The PF is an essential part of any financial plan. How you handle it will significantly impact your financial goals, especially long-term goals.
There are three options to be part of a PF:
- Save in an unexempt fund like the EPF under the EPFO.
- Invest in a company-run exempt fund recognized by the EPFO, paying at least the same interest as the EPF.
- Put your money in a company-run excluded fund, not EPFO regulated but set up with approval from the resident income tax commissioner, looking after all investments and fund management itself and self-regulated.
If you work in an organization with over 20 employees, the company must comply with the PF Act by being part of an exempt or unexempt PF trust.
Apart from returns, the ability for a contributor to access their savings in the fund is crucial. The EPFO often struggles with addressing service glitches, whereas employees prefer the more friendly and responsive company-run exempt trusts.
Are non-RPFC trusts better?
Employers and employees prefer trust managers outside the RPFC due to superior service levels. Though exempted funds must match EPF returns, they are better managed and have sometimes earned better returns.
What do employees gain from trusts not part of the EPFO?
Setting up the EPFO aims to protect employees' future through contributions today. However, accessing PF savings for financial obligations can be challenging with the EPFO but expedited through company-run trusts.
Why aren't more forming their own trusts?
In the past seven years, few organizations have obtained exempted status due to the dual role of the EPFO as regulator and administrator. Managing an exempt trust is less expensive, making it preferable for organizations and employees. Bringing existing exempted trusts under the EPFO's ambit could increase its deficit.
Warm regards,
Umesh Chaudhary
welcomeumesh@yahoo.com
From India, Delhi
Acknowledge(0)Amend(0)
Dear Umesh,
Thanks for narrating the advantages of our own PF trust over EPFO. Please let me know why such trusts were not created. What is the process of floating such trusts and the timelines for successfully registering the trust?
In addition, please also explain whether the funds of these trusts could be used for other purposes of the company.
Thanks,
P.V. Ramakrishna
From India, Hyderabad
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Thanks for narrating the advantages of our own PF trust over EPFO. Please let me know why such trusts were not created. What is the process of floating such trusts and the timelines for successfully registering the trust?
In addition, please also explain whether the funds of these trusts could be used for other purposes of the company.
Thanks,
P.V. Ramakrishna
From India, Hyderabad
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