What is an Exempted Trust in PF?

What is an Exempted Trust in PF?

What is an Exempted Trust in PF?

Some public and private sector companies have their own PF trusts that manage employee contributions instead of sending them to the EPFO. These companies are known as Exempted PF Trusts.

Contributions to Exempted PF Trusts

There are over 1,000 companies in India that have their own PF trust, such as Hindustan Unilever (HUL), TCS, Reliance, Wipro, Bharat Heavy Electrical's (BHEL), and more. These exempted or private PF trusts function in the same way as the EPF, following the same rules and providing members with a Universal Account Number (UAN).

Similar to EPF, both the employer and employee contribute 12% of the salary (Basic + Dearness Allowance) to the Exempted PF Trust. However, 8.33% of the employer's contribution goes towards the Employee Pension Scheme (EPS), which is managed by the EPFO, not the exempted PF trust.

While the EPF charges an administration fee of around 1.1% for its members, exempted PF trust members only pay an inspection charge of 0.18%. This could potentially lead to cost savings over time. Since PF trusts manage employee contributions, they must pay the same interest rate as the EPFO or a higher rate.

Ratings of Exempted PF Trusts

Private PF trusts are required to file monthly returns with the EPFO, which are then assessed and rated. The EPFO assigns a score to each exempted PF trust based on six factors:

1. Transfer of Provident Fund in Time

2. Investment of Funds in Time

3. Remittance of Funds to the Trust

4. Interest Declared at or Above the PF Rate

5. Settlement of Claims Within 20 Days

6. Audit

How to Withdraw PF from an Exempted Trust?

If you become unemployed, you can withdraw up to 75% of your EPF balance within one month. The remaining 25% can be withdrawn after two months of unemployment. The pension payouts are managed by the EPFO.

Read on: How to withdraw PF

How to Transfer PF from an Exempted Trust?

You can easily transfer your existing balance from one Exempted PF Trust to another. Alternatively, you can move the balance to an EPF registered company. If you transition to the unorganized sector or self-employment, you can choose to leave the balance with the employer or withdraw it after two months of unemployment. It's important to note that interest on the EPF balance with the old employer will be taxable.

Benefits of Exempted PF

Here are the benefits of being a member of an Exempted PF:

1. Efficiency: Exempted PF members pay only 0.18% as administrative charges instead of 1.1%.

2. Returns: Private PF trusts must offer at least the EPF interest rate or more, resulting in higher interest for members.

3. Service: Private PF trusts are more responsive and provide a higher level of service compared to the EPFO.

4. Taxation: Similar to EPF, employee contributions to an exempted PF trust, up to INR 1,50,0000, are tax exempted under section 80C of the Income Tax Act, 1961. Interest and employer's contributions are also tax-free. However, if you leave the company before completing five years of service, both the employer contribution and interest are taxable.

How to Check Exempted PF Trust Balance?

Although the private trust generates a UAN for you, you cannot view your EPF passbook online. Additionally, withdrawal requests for Exempted PF cannot be made online. You can view the details of your contribution in your salary slips, while all other details will need to be obtained from the company's HR department.

What is an Exempted Trust in PF?

Some public and private sector companies have their own PF trusts that manage employee contributions instead of sending them to the EPFO. These companies are known as Exempted PF Trusts.

Contributions to Exempted PF Trusts

There are over 1,000 companies in India that have their own PF trust, such as Hindustan Unilever (HUL), TCS, Reliance, Wipro, Bharat Heavy Electrical's (BHEL), and more. These exempted or private PF trusts function in the same way as the EPF, following the same rules and providing members with a Universal Account Number (UAN).

Similar to EPF, both the employer and employee contribute 12% of the salary (Basic + Dearness Allowance) to the Exempted PF Trust. However, 8.33% of the employer's contribution goes towards the Employee Pension Scheme (EPS), which is managed by the EPFO, not the exempted PF trust.

While the EPF charges an administration fee of around 1.1% for its members, exempted PF trust members only pay an inspection charge of 0.18%. This could potentially lead to cost savings over time. Since PF trusts manage employee contributions, they must pay the same interest rate as the EPFO or a higher rate.

Ratings of Exempted PF Trusts

Private PF trusts are required to file monthly returns with the EPFO, which are then assessed and rated. The EPFO assigns a score to each exempted PF trust based on six factors:

1. Transfer of Provident Fund in Time

2. Investment of Funds in Time

3. Remittance of Funds to the Trust

4. Interest Declared at or Above the PF Rate

5. Settlement of Claims Within 20 Days

6. Audit

How to Withdraw PF from an Exempted Trust?

If you become unemployed, you can withdraw up to 75% of your EPF balance within one month. The remaining 25% can be withdrawn after two months of unemployment. The pension payouts are managed by the EPFO.

Read on: How to withdraw PF

How to Transfer PF from an Exempted Trust?

You can easily transfer your existing balance from one Exempted PF Trust to another. Alternatively, you can move the balance to an EPF registered company. If you transition to the unorganized sector or self-employment, you can choose to leave the balance with the employer or withdraw it after two months of unemployment. It's important to note that interest on the EPF balance with the old employer will be taxable.

Benefits of Exempted PF

Here are the benefits of being a member of an Exempted PF:

1. Efficiency: Exempted PF members pay only 0.18% as administrative charges instead of 1.1%.

2. Returns: Private PF trusts must offer at least the EPF interest rate or more, resulting in higher interest for members.

3. Service: Private PF trusts are more responsive and provide a higher level of service compared to the EPFO.

4. Taxation: Similar to EPF, employee contributions to an exempted PF trust, up to INR 1,50,0000, are tax exempted under section 80C of the Income Tax Act, 1961. Interest and employer's contributions are also tax-free. However, if you leave the company before completing five years of service, both the employer contribution and interest are taxable.

How to Check Exempted PF Trust Balance?

Although the private trust generates a UAN for you, you cannot view your EPF passbook online. Additionally, withdrawal requests for Exempted PF cannot be made online. You can view the details of your contribution in your salary slips, while all other details will need to be obtained from the company's HR department.

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