The Employees’ Provident Scheme (1952) came into effect to ensure social security for workers in both the organized and unorganized sectors.
The companies have to contribute to the Employees’ Provident Fund Organisation (EPFO) trust towards the EPF fund.
But some companies can also manage their own private PF trust if they acquire the exemption from the government.
Private PF trusts function according to the same rules as the EPF

Efficient – Members need to pay only 0.18% rather than 1.1% for an administration charge.
Higher returns: It can declare a higher interest rate than the EPF.
Quality service: In terms of customer satisfaction EPFO service is slow and poor. It can provide better service for its members.
Members get 80C Benefit upto Rs. 1.5 lakhs
The interest on private PF trusts is exempt from tax (Subject to 5 years service period withdrawal condition)

EPFO is a central govt. body where as the private trusts are authorized by EPFO
EPFO functions under Ministry of Labour but these trusts function under EPFO
Though the trusts are private, 8.67% of the Employer’s contribution of 12% is allocated to Employees’ Pension Scheme (EPS) which is managed by the EPFO
The private trusts should maintain PF accounts, regularly remit pension contributions of the members to the EPFO, issue annual accounts slips & Submit a periodical report to the EPFO

Application to the Government through the jurisdictional Regional PF Commissioner
Creation of a board of trustees for the smooth functioning & Governance of the PF scheme

Private PF trusts have to file monthly returns with the EPFO and they are rated by the EPFO based on 6 parameters
Contributions received by these trusts is deemed to be a Capital receipt and income in the nature of interest & dividend is also exempt u/s 10(25)(iv)
Trusts can invest the contributions either with any LIC Scheme or Investments approved under Rule 67(2) of Income Tax Rules 1962

READ REGULAR BUSINESS NEWS? CLICK HERE TO DOWNLOAD APP

PF Trusts – An Overview

CA Prabhath Sharma Ganti