Tightening the rules for exempted provident funds, the EPFO on Tuesday amended the norms to impose a retrospective fine or surcharge on those flouting investment rules.
EPFO has also mandated stern action against those violating the rules, including cancellation of a private PF’s exemption. “If the trust invests in a security/scrip in which investment is not at all permitted, it cannot be said to be a deviation but violation, which may attract cancellation or withdrawal of exemption,” the EPFO said in an internal circular.
The new guideline is aimed at disciplining exempted PFs floated by large corporates as EPFO noted that some of them have “failed to adhere to the notified investment patterns for one reason or the other”. Exempted funds manage over Rs 1.6 lakh crore of employees savings.
Incidentally, the finance ministry’s move to impose retrospective taxation in 2011-12 had spread panic among foreign investors. Exempted Pfs, too, had opposed a proposal of retrospective fines during their deliberation with EPFO last fiscal.
However, a sub-committee of EPFO’s central board of trustees decided to go ahead with the retro fine but decided to keep it minimal. While the fine will be a nominal 0.0025% of the amount of shortfall in investment in government bonds from the mandated level and 0.005% for PSU bonds, it is steeper at 0.25-0.5% for any prospective deviation in investment from this fiscal.
Repeated deviations will invite higher fines ?0.5% for the second time and 1% for the third time for central and state government bonds and 1% and 2% in the case of PSU bonds. EPFO also made it clear that “any more deviation may result in cancellation of exemption or withdrawal of relaxation?.
