Provident Fund
ria
(Querist) 20 October 2009
This query is : Resolved
Dear All,
Kindly enlighten me on the procedure to be followed for creating a trust for provident fund for employees in an organization.
Thanks
R.R. KRISHNAA
(Expert) 20 October 2009
For registering a trust you need to process your application as per section 12 A/12AA of the Income Tax Act, 1961.
Application should be filed with the Commissioner/Director (Exemptions) under Form 10A as per Rule 17A.
ria
(Querist) 20 October 2009
Thanks a lot,
But would this cover a trust created for Provident Fund of Employees
R.R. KRISHNAA
(Expert) 20 October 2009
I only mentioned the procedure for registration of trust alone. But I am not sure whether a trust can be created for provident fund of employees. Though Supreme court has ruled that a trust can be created for Labour Welfare, I am not sure as to whether provident fund would also come under that purview.
But my personal opinion and interpretation of the provisions, say that it can be done.
Sachin Bhatia
(Expert) 20 October 2009
Section 12AA
PROCEDURE FOR REGISTRATION.
(1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) of section 12A, shall - (a) Call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such a inquiries as he may deem necessary in this behalf; and
(b) After satisfying himself about the objects of the trust or institution genuineness of its activities, he - (i) shall pass an order in writing registering the trust or institution;
(ii) Shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant :
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.
(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) of section 12A.
Raj Kumar Makkad
(Expert) 20 October 2009
Yes. Trust for the purpose of provifund fund of the employees can be set up and that trust shall be treated as exempted under section 17 of EPF & MP Act, 1952.
Suhas
(Expert) 21 October 2009
There are 2 aspects to creating a Provident Fund Trust -
1) The Ministry of Labour aspect (Covering the recognition under Sec 17 of the EPF and MP Act), and
2) The Ministry of Finance aspect (Covering the Income Tax Recognition, tax deductions etc), and
Let us first look at the Ministry of Labour aspect.....
You must first find out if your company falls within the purview of the EPF Act, 1952. If it does( Which can be determined by referring to Schedule 1 of the Act and verifying if the employee strength is above 10), then you would have to seek coveraged under Section 1(3) of the Act.
To confirm that you have been covered under the EPF Act, the Regional Provident Fund Commissioner will give you a code number
If your company already has a code, then the first step is already taken care of.
After getting a code number, you will have to create a trust by way of a trust deed, and the trust rules would have to be along the lines of the model trust rules specified by the Regional Provident Fund Commissioner. These model trust rules are available at the local EPFO office.
Once the trust is created, you will have to apply for exemption under Sec 17(1)(a) of the EPF Act, or under Sec 17(1)(b)of the Act read with Para 27a of the EPF Rules. The application will have to be accompanied by a list of documents and declarations as specified by the Asst. Provident Fund Commissioner (Exemption)
Once the EPFO satisfies itself that your application is in order, it will grant your trust "exempted status" and thereafter you can proceed to applying for IT Recognition
Alternatively, if your company is not covered under Schedule 1 of the Act, then registering for coverage is not necessary, and you will only need to concern yourself with the Ministry of Finance Aspect.
To apply for Income Tax Recognition, you will have to make an application with all the documents that are required by the IT Authorities.
Part A of Schedule IV of the Income Tax Act related to the norms governing PF Trusts.
Once you make this application, and once the IT inspectors are satisfied that everything is in order, you may start running your trust.
Something that you must make a note of is that in cities like Mumbai, the entire procedure takes at least 1 year. It takes less time in the smaller cities.
Futhermore, there is a requirement for constant follow-up with the EPFO office as well as the IT office, for which your company will probably have to appoint consultants.
For futher information, I believe that there are at least 3 companies that you can contact.
1) Darashaw & Co, Mumbai
2) VPD Consultants, Mumbai
3) Indialife
Note: I don't work for any of the above companies.
