EPFO decides to fine PF trust flouting investment rules
May 07 2014 , New Delhi
In the organised sector, firms run private provident fund trusts (PPFTs) for managing their workers funds and accounts themselves.
These PPFTs are also called exempted establishment and the members of such trust enjoy benefits at par with the subscribers of Employees' Provident Fund Organisation (EPFO) .
"..Failure to make investments as per the directions of the government shall make the board of trustees (of PPFTs) separately liable to surcharge as may be imposed by the Central Provident Fund Commissioner or his representative," an office circular for field office of EPFO said.
These trusts as well as their regulator EPFO make investments of the fund as per the investment pattern prescribed by the government.
According to the circular, deviation can be regulated by the levy of surcharge within the securities class.
However "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/relaxation," it stated.
There are over 3,000 PPFTs which are being regulated by the EPFO. These trusts manage fund to the tune of around Rs 2 lakh crore.
The surcharge will be applicable at the rate of 0.0025 per cent on deviation in investment in government bonds from the mandated level till 2013-14. The penalty would be 0.0025 per cent for PSU
bonds and 0.005 per cent in private sector bonds for any deviation from investment rules.
The surcharge will be higher for the prospective violators as it would be imposed at a steeper rate ranging between 0.25 per cent to 1 per cent for any future deviation from mandated investment in central and state government securities from 2014-15 onwards.
Similarly, the deviation in investment in bonds and securities of public financial institution would attract a surcharge from 0.25 per cent to 1 per cent.
The surcharge rate for investment rule violations will range between 0.5 per cent to 2 per cent in case of private sector bonds.
It is observed by the EPFO, that "the board of trustees of these exempted establishments have many times failed to adhere to the notified pattern of investment for one reason or the other."