New Delhi: Private trusts, many of them established by big firms to manage their employees’ provident funds, stand to lose tax benefits if they do not follow norms set by the Employees Provident Fund Organization (EPFO).
EPFO, a government-managed pension fund, might revoke income-tax (I-T) concessions of at least 462 private trusts if they fail to comply with guidelines such as submitting new documents and balance sheets, and incorporating changes that its new rules require from time to time, an official said.
“We have started sending draft notifications to all the concerned governments, which then send show-cause notices to these defaulters,” said P. Sudhakar Babu, additional central provident fund commissioner (compliance) with EPFO. “If they continue to default, we will cancel their exemption.” Private trusts seek exemption from EPFO and the I-T department to avail of I-T benefits. A corpus of at least Rs728 crore is locked with these 462 establishments.
Currently, there are 2,589 exempted private trusts that manage as much as Rs67,132 crore, close to 28% of EPFO’s corpus. EPFO directly manages Rs1.76 trillion through 4,69,089 unexempted establishments. In case these organizations fail to comply with guidelines, their exemption will be cancelled and the money will then be directly managed by EPFO officials, Babu said. He declined to name any of the private trusts, or the companies that manage them.
“If there are any defaulters, they should definitely be punished by the organization,” said Sushil Kumar Jain, chairman of accounting firm Sushil Jeetpuria and Co. “However, the organization needs to speed up its process of giving approvals to private trusts. Not a single private trust has been given exemption in several years. Around 700 are working as deemed exempted funds, as they only have temporary relaxation by EPFO.”
The EPFO official, however, said that only 250 applications are pending due to failure of the concerned firms to comply with new guidelines. The organization expects to clear all of them by March.
“Out of 700 applications pending, 300 companies have closed (down) or are in the process of liquidation. One hundred and fifty files have already been processed and the remaining 250 will be completed by March 2009,” he said.