Exempted PF Trust

Enjoy benefits of an Exempted PF Trust. Secure your employees' future with tax advantages and flexible investment options.
Exempted PF Trust
3 min
14-April-2024

An Exempted Provident Fund Trust (EPFT) is a Provident Fund Trust that is set up and run by a large corporation or public sector undertaking that is exempt from contributing to the EPF. The EPFO grants these companies an exemption to manage employee contributions instead of sending them to the EPFO.

Exempted Provident Fund Trust

The Indian Government on 15th November 1951, established the Employee Provident Fund Organisation (EPFO) to provide retirement support to employees of the organized sector. All Organisations that have more than 20 employees have to compulsorily contribute to the Employee Provident Fund(EPF). The employee and employer representatives, of the government, public, and private sector Organisations, are participant members of the Central Board of Trustees, which follow the rules set by the Indian government.

In India, there are more than 1200 large corporations and public sector undertakings that are granted exemption from contributing to the EPF. They set up and run their own Provident Fund Trust, which is governed by the laws under the Employees Provident Fund & Miscellaneous Provisions Act, 1952. These are known as Exempted Provident Fund Trusts. The objective behind setting up this trust is to have better financial gains and more flexibility as compared to an Employee Provident Fund (EPF). The trust has representatives of the employer and employees, who make decisions regarding the operation, investment of the funds, and rules of withdrawal of the funds by the employees.

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Exempted PF Contributions

In the organisations with Exempted Provident Fund Trust, the employer and the employee have to contribute 12% of the salary, and the dearness allowance, towards the Provident Fund, which is similar to the government-governed Employee Provident Fund. The employer has to necessarily contribute 8.67%, of the 12%, in the Employee’s Pension Scheme (EPS), which is governed by the Employee Provident Fund Organisation(EPFO). The exception in an Exempted Provident Fund Trust is that the contribution limit to the EPF by the employee can be increased more than the set percentage, by the employer, keeping in alignment with the financial objective of the employees. The EPFO contributing Organisations have to pay an administrative charge amounting to 1.1%, whereas the Exempted Provident Fund Trust has to pay only 0.18% towards inspection charges.

The organisation manages the provident fund accounts of the employees. They have the flexibility to invest the fund in government bonds, securities, fixed-income financial instruments, equities, mutual funds, and any other market-linked financial instrument, with the objective of garnering more return as compared to the EPFO.

Withdrawal from Exempted PF

As compared to Employee Provident Fund Organisation, Exempted Provident Fund Trust offers lots of flexibility in terms of withdrawals of funds, from the account by the employees. Partial withdrawals and loans can be availed by the employees in case of any dire financial requirement at any point in time. The terms and conditions set for these withdrawals are set by the employer and are a lot less stricter than the EPFO.

In case an employee shifts from one Exempted Provident Fund Trust governed company to another, then the Provident Fund account can be transferred to the other company. In case of termination of employment, then 75% of the PF amount can be withdrawn within one month of the termination, and the remaining 25% can be withdrawn after two months. In case an employee shifts to a smaller Organisation or becomes self-employed, then the terms that apply during termination are applied here too.

Rating of Exempted PF

The companies under Exempted Provident Fund Trust have to file their monthly returns with the Employee Provident Fund Organisation(EPFO). The EPFO has certain guidelines on which they rate a company, these are

  • Investment of funds timely
  • Time taken to transfer the funds
  • Remittance of funds to the trust
  • Interest declared, whether it is equivalent to the EPF rate or more
  • Settlement of claims within the 20 day period
  • Regular audit

The ratings provide valuable insights to the employees regarding the stability and value of the provident fund set up. It also gives an important update about the creditworthiness, financial stability, efficiency of the management, and transparency to the employees with regard to their retirement planning.

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Benefits of Exempted PF

Exempted Provident Fund Trust is beneficial for both the employee and the employer too. Let us have a look at the potential benefits:

  • The contribution percentage of the employee can be changed which can be more beneficial to the employee in long-term financial goal planning. This also serves as a major retention factor for employees at higher positions for the company.
  • The company has the flexibility of investing the funds in financial investment instruments which guarantee higher returns, as compared to EPFO, where the returns are low as investment is allowed in low risk government authorized financial instruments.
  • The withdrawals and loan facilities have less strict rules and regulations, and the employers have the authority to decide the terms and conditions that are more advantageous to the employee and the employer too. The services are faster and within the set time period.
  • The employer does not have to pay the administration charges of 1.1%, instead only 0.18%.
  • Contribution to the provident fund is tax-free for the employer. The employees too can avail of tax deduction under section 80 cc of Income tax up to Rs. 1.5 lac investment in PF.

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Conclusion

Exempted Provident Fund Trusts offer employers and employees flexibility in contributions, investments, and withdrawals, fostering long-term financial stability and retirement planning. With tax benefits and streamlined services, these trusts serve as valuable assets in financial management.

Calculate your expected investment returns with the help of our investment calculators

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Frequently asked questions

Which form do I need to transfer my PF?
To transfer the PF you will have to fill a Transfer Claim Form- Form No. 13. This has to be sent to the Provident Fund account with the details of the Exempted Provident Fund Trust name and address. This ensures a seamless transfer to the other employer, without the loss of any previous benefits.
How do I find out if my PF is exempted?
To find out if your PF is exempted, you can check your payslip, and your appointment letter, or contact the HR department. If you are allocated a Universal Account Number(UAN), in case of an exempted PF trust, you will not be able to check the account status online or make any online withdrawal requests.
How does the PF trust work?
The PF Trust is governed by the rules and regulations of the Act of Employees Provident Fund & Miscellaneous Provisions Act, 1952. The employer and the employee have to pay 12% of the salary and dearness allowance. The employer pays 8.67% of the 12% to the Employee pension Scheme, governed by the EPFO.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.