Understanding the Benefits and Drawbacks of Having an Exempted Provident Fund Trust vs. Registering with Government PF Authority

A company has a trust for provident fund and is exempted from getting itself registered with the Provident Fund Authorities. I would like to know the benefits of having its own trust for provident fund deducted from the salaries of the employees instead of registering the company with the Government PF Authority. Is it advisable to get the organization registered with the PF authority? What benefits are available in the Income Tax Act for such a trust? Also, I need the revised Provident Fund Rules after the new rules that came into effect in July 2007 which can be filed with the PF Authorities.

Please advise.

Kapoor

The Employees' Provident Fund Scheme is broadly divided into two parts :

1. Unexempted Provident Fund Scheme and
2. Exempted Provident Fund Scheme.

(a) Unexempted Provident Fund Scheme :
The establishment to whom the Employees' Provident Fund & Miscellaneous Provisions Act 1952, is made applicable and compliance in respect of their employees are made with the Regional Provident Fund Commissioner, Set-up in respective region, and the returns, claims for settlements, applications for withdrawals are processed through the office of the Regional Provident Fund Commissioner. In the case of unrecognised Provident Fund Scheme the employer has to deposit the monthly contributions with State Bank of India and forward the acknowledged copy of the receipted challan alongwith the monthly return to the office of the Regional Provident Fund Commissioner. Employer need not do any investments nor bother of paying the statutory rate of interest.

(b) Exempted Provident Fund Scheme :
Under the Exempted Provident Fund Scheme, the employer forms his own Provident Fund Trust for benefits of his employees. The employer executes the Trust Deed, prepares the Provident Fund Rules and nominates the trustees amongst its employees for administering and managing the Trust. On formation of Provident Fund Trust the employer has to obtain recognition to the Provident Fund Trust from the Commissioner of the Income Tax and thereafter apply to the office of the Regional Provident Fund Commissioner for granting exemption from the Provisions of the Employees' Provident Fund & Miscellaneous Provisions Act 1952 and the Schemes framed thereunder. Such recognised and exempted Trust is a separate legal arrangement. The employer pays its monthly contributions to the Trustees who are in charge and responsible for day to day management and administration of the trust including that of doing necessary investments as per the pattern laid down in Rule 67 of the Income Tax Rules 1962.

Hi,

I'm working as an HR professional and handling the Provident Fund (PF) for the government's Regional Provident Fund Commissioner (RPFC). However, our organization has now decided to manage the PF Trust. Please help me because I am not aware of the documentation required for joining and leaving employees, as well as for submitting monthly and annual returns.

Please guide me on this matter.

Regards,
Kirti Arora

Can you please let me know the formula for the calculation of interest on member contributions for exempted establishments (i.e., PF Trust)?

---

Thank you for your query. The formula for calculating interest on member contributions for exempted establishments, such as a PF Trust, typically involves multiplying the member's contribution by the applicable interest rate over a specified period. The specific formula may vary based on the rules and regulations of the PF Trust in question. I recommend reaching out to the trust administrators or consulting the trust's documentation for the precise calculation method used.

If you require further assistance or clarification on this matter, feel free to ask.