A company is having a trust for provident fund and is exempted from getting it self registered with the Provident
Fund AUthorities. Would like to know the benefit of having a own trust fro provident fund deducted from the salaries of the employees against registering the company with the Government PF Authority. Is it advisable to get the organisation registered with PF authority. What benefit are available in Income Tax Act for such trust.
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.
Subject - Why PF Trust better than EPF ?
A salaries employee wish to buy a flat costing Rs. 10 Lakhs therefore he would either opt for a house loan paying huge interest rates or one would go for advance/withdrawal from PF but that's a long long procedure. Therefore rather than opting for the archaic EPFO (Employees Provident Fund Organisation). Instead of waiting aeons for his PF proceeds, one can withdraw money from his PF account in a couple of days.
You contribute 12 per cent of your basic pay. this instrument enables employees to build a corpus to see them through tough times between jobs -. "With no social security available. and most employees prefer to deal with the more friendly and responsive company-run exempt trusts. The second avenue is to invest in a company-run exempt fund recognised by the EPFO and which pays at least the same interest as the EPF. Getting them to sort out even minor service glitches could be a nightmare. What do employees gain from being part of trusts that are not part of the EPFO?
. something the EPFO does not bother about. So.and finally after retirement. where they seem to be heard. there's also the matter of a contributor being able to access his savings in the fund. the company falls under the PF Act and will have to be a part of a PF trust that is exempt or un-exempt to comply with the PF Act. The third is to put your money in a company-run excluded fund." Obviously. mandatory. defined contributions that accumulate till you retire. Apart from returns. the PF is an important part of any financial plan. tax-qualified. If you work in an organisation that employs more than 20 people. Why PF? When you join any provident fund it means that you automatically make regular. and your employer matches this amount. which is not EPFO regulated.That's just one of the many advantages of an exempted PF trust. There are three options to be part of a PF: One is to save in an un-exempt fund like the EPF under the EPFO. and in some years have earned better returns than what the EPFO has declared. how you handle it will make a huge difference to your financial goals. Are non-RPFC trusts better? The biggest factor that keeps employers and employees outside the RPFC is the service levels they get from trust managers. particularly long-term goals. They are better managed. they offer far superior service. We take a look at the other ways in which this kind of trust scores over the EPF that is supervised by the regional PF commissioners. This type of fund looks after all investments and fund management itself and is self-regulated. Though exempted funds have to match the EPF returns.as the amount can be partly withdrawn as a loan -. but is set up with approval from the resident income tax commissioner.
regulator and administrator. it invariably becomes a Herculean task for him to get his money out of the EPFO.You must understand that the purpose of setting up the EPFO is to protect employees' future by making them contribute today. Company-run trusts. After all. It's time-consuming and often fruitless. This has a lot to do with the dual role that the EPFO plays -. expedite such matters. on the other hand. its corpus will almost double. there are instances when a member needs to dig into his PF savings to meet certain financial obligations like medical treatment. Why aren't more forming their own trusts? The first reason is that in the past seven years. These can be refundable or non-refundable loans. housing loan or education.
. which is not what one wants in an emergency. As the cost of managing an exempt trust works out less expensive than being a part of the EPFO. hardly any organisations has managed to get an exempted status. there is always reason for organisations and employees to prefer exempt fund status to one under the EPFO. making its deficit go up that much more. However. the money is there for the investor when he needs it. However. marriage. The EPFO must also understand that by bringing the existing exempted trusts under its ambit.