New Delhi: Close to 100 private trusts, many of them established by big firms to manage their employees’ retirement savings, have lost tax concessions because they failed to comply with the norms of the state-run Employees’ Provident Fund Organisation (EPFO).
EPFO can revoke income-tax (I-T) exemptions granted to such trusts if they fail to comply with guidelines requiring them to submit balance sheets and other documents and incorporate rule changes introduced by it from time to time.
“Around 100 defaulters have lost their exemption status this year,” said P. Sudhakar Babu, additional central commissioner in charge of compliance at EPFO. “While a few cases are still pending with us, several have already sent the required documents to us.”
Babu said most of the trusts belonged to the jute industry but declined to name any of the private trusts or the companies that had established them.
Currently, there are 2,589 tax exempted private trusts that manage as much as Rs67,132 crore, close to 28% of EPFO’s corpus. EPFO directly manages Rs1.76 trillion.
Under I-T benefits offered to these trusts, the contribution of employers to an employee’s provident fund is treated as a deductible expenditure and the income of the trust is not subject to tax.
Employees’ contributions is tax-deductible under section 80C of the I-T Act and withdrawals by members are not liable to tax in their hands.
In February, Mint reported that around 462 private trusts could lose tax benefits if they failed to comply with EPFO rules. The trusts, identified as defaulters for non-compliance, were managing a collective corpus of at least Rs728 crore.