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1,550 PF trusts may lose I-T benefits


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Old 01-10-2009, 03:23 AM
funguy
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Default 1,550 PF trusts may lose I-T benefits

Over 1,550 private provident fund trusts run by Indian companies could lose their income tax benefits in less than three months time.


These private trusts enjoy tax benefits on the basis of their affiliation to the Employees Provident Fund Organisation (EPFO) through temporary relaxations granted by it. The deadline for getting recognised by the government as an exempted fund under EPFO expires on March 31, 2009.

The finance ministry had mandated in 2006 that private provident trusts should obtain exemption under the EPF Act within a year from the labour ministry if they wanted to continue enjoying tax benefits under the Income-Tax Act.

The deadline has been extended twice since then as the process has proved to be tedious. Till now, only one company has till been able to get exemption, according to PHDCCI member and chartered accountant Sushil Jain.

The EPFO, which is supposed to forward exemption applications filed by the private trusts to the government for final approval after scrutinising them, has forwarded 400 applications of the total 1,550 in the last two-and-a-half years, Mr Jain said. The fate of these 400 funds is also not known as the labour ministry is in double minds about giving its approval, he added. A labour ministry official clarified that several funds are violating investment accounting norms. Industry bodies are now planning to approach the finance ministry for further extension of the deadline, Mr Jain said.

There are a total of 2,589 private trusts as per EPFO statistics, with Rs 65,000 crore corpus, which are recognised under the Income-Tax Act. However, only about 1,000 trusts enjoy the exempted status which was given to them way back in the seventies, Mr Jain said. The remaining are operating as ‘deemed exempted funds’ as they only have temporary relaxation orders by the EPFO.
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Old 01-10-2009, 03:24 AM
funguy
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Default Four million private PF subscribers may lose tax benefits

Over four mn employees affiliated to over 2,500 private provident funds face the threat of losing income tax benefits on their PF contributions, as the government seems to be having second thoughts over giving these bodies permanent recognition.

Taking a plea that privately-run PFs are violating investment accounting norms, the Labour Ministry is not inclined to award final approvals to these trusts.

Over 2,500 private PFs are operational, but under a temporary recognition given by the Employees Provident Fund Organisation (EPFO). The temporary EPFO recognition enables them to qualify for tax exemptions.

However, the Income Tax authorities had been warning the privately-run PFs that the tax benefits to their subscribers would be in jeopardy if they did not get a final approval from the Labour Ministry.

But the ministry found that several of these funds were not following the norms and not maintaining the accounts as per the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, Joint Secretary in the Ministry of Labour S K Srivastava said at a PHDCCI function here.

"Even today we held a meeting over this. It will take some time for us to formulate how to go about this. Under the circumstances, it seems difficult to allow final approval to any of the trusts unless things are in order," he said.

Subscribers to the private PFs are allowed income tax exemptions under section 17(1)-A of the IT Act.
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