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Provident Fund

(Querist) 25 February 2008 This query is : Resolved 
Dear Sir,
we are a limited company having more than 2000 employess and regularly deduting and depositing the providend fund as per rules.

Now company wants to create his own trust for the better return to the employees by way of investing the money in some secrities.

Now i want to know that does a company who is form last 10 years adopting the scheme of provident fund can creat his own trust for the betterment of the employees. if yes what is the procedure and which are the legal provisions, Forms etc.



Prakash Yedhula (Expert) 29 February 2008
Formation of PF Trusts


a) Total Compliance with RPFC
b) Covered Trust for All Members
c) Excluded Trust for Excluded Employees with approval under Schedule IV part A of the Income Tax Act, 1961.
d) Trusts for Both Covered and Excluded Employees

. Definition :
"Excluded Employee" an employee of the Company to whom both of the following two conditions apply at the time of the coverage of the Company under the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 or at the time of his joining the services of the Company, whichever is later.

i His pay at the relevant time is more than Rs 6500/- per month.

ii He does not have any current PF Balance

An Excluded Employees' Trust is one, which does not come under the purview of the PF Department, but its policies are framed based on the PF Act.

The regulatory Statute is the Income Tax Act, 1961. The rate of contribution by the member can be any amount not exceeding his basic salary including DA (if any)

The employer can decide to contribute any amount up to 12%. Employer contribution above 12% is taxable in hands of employees

Employee Contributions eligible for Sec. 88 rebate / 80C Deduction Interest on Employer and Employee contributions are tax free

However, withdrawals before completion of 5 years of membership, become taxable in year of withdrawal with conditions.

Apart from the financial benefits, some very important benefits become available to employees who are members of voluntary PF Trusts in comparison to the unexempted establishments :

Easy Availability of advances

No hassles of Dealing with Public departments

Availability of Refundable advances

Faster transfer of accumulations for outgoing members

Faster settlement of final dues


Establishments employing 20 or more persons and engaged in any of the 177 industries / Businesses specified.

Co-operative Societies, employing 50 or more persons & working without the aid of power.

Establishments not coverable statutorily can opt for coverage.

An establishment continues to be covered under the Act, irrespective of fall in the employment strength.

Since the Act applies on its own force to the establishments, the employers are required to file the particulars in the specified format for registration and allotment of business number.

When can a company opt to set up an Exempted Trust ?

Covered under the provisions of the PF &MP Act, 1952

Profit making Company

20 employees

Pass a Board Resolution

File for exemption with the RPFC

Apply to the CIT for recognition of PF Trust

On receipt of the approval from RPFC the Trust can comply as “Exempt”

Hiralal Das (Expert) 07 April 2009
Thanks all of you the ld. member and the author.
I think your valuable opinion will assist everybody to solve their problem/matter in question properly.
Y V Vishweshwar Rao (Expert) 02 May 2009
Thanks to Mr Y Prakash , you have explained in detail and given lot of information
Raj Kumar Makkad (Expert) 21 November 2009
I pay special thanks to Mr. Prakash for increasing and updating our thorough knowledge on the subject.
A K CHANDOK (Expert) 26 November 2009
Yes, such a co. can seek Exemption under Section 17 of the EPF & MP Act 1952 from the RPFC OF THE REGION provided it is having its own Trust duly recognised by the Income Tax Deptt. concerned beside having its P.F.Rules having benefits not less than those as provided under EPF Act. For this, Model PF Rules can be downloaded from web-site of ,,
Gulshan Tanwar (Expert) 01 May 2010
Prakash is lightening all of us
Adv.Shine Thomas (Expert) 12 January 2011
thanks to Mr.Prakash & Mr.Chandok for detiled explanation.
Gulshan Tanwar (Expert) 14 January 2011
Gulshan Tanwar (Expert) 23 January 2011

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