Choosing Between Excluded Provident Fund and Employee Provident Fund: Which Is Right for Our New Organization?

Dear All,

I need your guidance on the setting up and benefits of an Excluded Provident Fund and Employee Provident Fund. We are a new organization and are opting out for PF. I need your guidance as to which one we should opt for and why.

Awaiting your responses.

Warm regards,
Nidhi

Hi Nidhi,

For a company to form a trust of its own is a bit tough, and there would be a lot of queries from the Regional Provident Fund office. But when it comes to the Transfers and Settlements of Employees' PF, there can be nothing better than a Trust, which is administratively easier, and the settling time is the least.

Trust EPFO
Advantages for an Employee: Easy settlement of cash, Safe settlement of cash
Advantages for an Employer: Easy Administration, Safe & accurate settlement
Disadvantages for an Employee: Cash may or may not be settled, Follow-up
Disadvantages for an Employer: - , After settlement status not known

Hope this piece of info helps to a certain extent.

It was helpful, but I need to confirm with you through some readings. I have done on this topic. I understand that the Govt has withdrawn the tax benefits for the excluded provident fund starting April 07. Please share your knowledge on this.

Regards,
Nidhi

Hi all,

Please refer to this site for the reference for issues related to PF: http://epfindia.nic.in.

Thank you.

Hi Friends,

Can anyone tell me the difference between Excluded PF and Employee PF? "Excluded PF" is a new term for me.

Regards,
Amith R.

Hi all,

Can anyone tell me whether we can apply para 26A(2) to an Indian employee posted in a country with whom we have a SSA in place and limit his contributions to 12% of 6500?

Dear Mr. Amith,

Understanding Excluded PF and Employee PF

Excluded PF means PF not covered due to fewer employees, below 20 in number, or those who are not interested in joining PF despite drawing a salary above Rs. 6501/- per month.

Employee PF refers to members in PF who pay 12% of the employee's share on their monthly basic salary to PF authorities as their monthly contribution.

Regards,

K. Suresh

Dear Amith & Suresh,

I think the term 'excluded PF' refers to an exempted PF trust. If the employer provides better benefits than the EPFO, an exemption to run the employer's own trust may be granted.

As far as the employees are concerned, the exempted trust is preferable because they will receive better benefits, and it will be easier to approach the authority and get various requirements sanctioned.

Regarding the employer, there is one benefit. Instead of the administration charge of 1.1%, they have to remit only 0.18% towards the inspection charge, i.e., the employer can save 1.1% - 0.18% = 0.92%. At the same time, there are many risk factors in running an independent trust, especially since the interest rates in EPF are higher than bank rates. Moreover, they compound monthly. The investment should also comply with the guidelines of the EPFO. Hence, it is not easy for the exempted trust to meet the interest at par or a higher rate with the PF.

Regards,
Abbas. P.S

Dear Sir, I would like to know if my basic salary is more than INR 20,000/-, but the employer deducts 12% PF only on the basic salary of INR 6,500/-. Is this correct?