Business Standard

Pvt PF trusts get a yr to meet exemption norms

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Prashant K Sahu New Delhi
The finance ministry has extended by one year the deadline for corporate provident funds to comply with the new norms for continuing to enjoy tax exemptions.
 
The Finance Bill, 2008, proposes to extend the time limit to March 31, 2009, to provide time to the Employees' Provident Fund Organisation (EPFO) to decide on the pending applications seeking exemption under Section 17 of the Employees Provident Fund and Miscellaneous Provisions (EPF&MP) Act, 1952.
 
This is the second such extension for PF trusts. The original deadline of March 31, 2007, was extended by a year.
 
Corporate PF trusts cover employees whose monthly salary exceeds Rs 6,500 and are outside the purview of the government's employees provident fund schemes.
 
The amendment now makes it compulsory for corporate PF trusts to comply with the EPF&MP Act to claim exemptions under Section 17 of the Act.
 
That makes these PFs trusts subject to two regulators "" the income tax commissioner and the provident fund commissioner.
 
Based on a 2006 amendment to the Income Tax Act, PF trusts have to be certified by provident fund commissioners under the labour ministry to qualify for tax breaks.
 
Prior to the amendment, PF trusts, which followed investment norms, needed recognition only from income-tax authorities. Due to the amendment, hundreds of provident funds, managing thousands of crores of rupees, were in a fix.
 
PF trusts have been complaining of delays in getting approvals from provident fund commissioners. Officials in many companies even allege that touts have approached them for "help" in getting the approvals.
 
The change in the I-T Act was introduced following defaults by certain provident funds in meeting their obligations, according to an industry source.
 
The Income-Tax Department tightened the norms to distance itself from any wrongdoing by making it mandatory for them to get approval from provident fund commissioners for continuing to get tax exemption.

 

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First Published: Mar 06 2008 | 12:00 AM IST

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