Some businesses have created their own PF trusts to manage employee contributions rather than submitting them to the EPFO. EPFO has granted these firms an exemption to allow them to do so. In India, there are 1,375 such firms, including big corporations such as TCS, Wipro, Hindustan Unilever (HUL), and Reliance, as well as public-sector organizations such as Bharat Heavy Electricals (BHEL). A complete list of exempted PF trusts may be found here. It is believed that there are up to 50 lakh members in such trusts (employees). Private PF trusts operate under the same regulations as the EPF, and members are assigned UANs (Universal Account Numbers).

Exempted PF Contributions

The employer and employee of an exempted PF trust both contribute 12 percent of their salaries to the Provident Fund, much as the EPF. However, 8.67 percent of the employer contribution of 12 percent is given to the Employees’ Pension Scheme (EPS), which is handled by the EPFO, rather than the exempted PF trust.

However, instead of the 1.1 percent administration charge that ordinary EPF members pay, PF trust members only pay 0.18 percent as an inspection price. This can result in significant cost savings over time.

Private PF trusts handle the money of the company’s employees. They must provide the same or a greater interest rate as EPFO. This second component, a higher rate, is a significant justification for establishing a private PF trust.

Withdrawal from Exempted PF 

You can take 75% of your money within one month after being laid off, and the remaining 25% after two months. After the age of 58, you can apply for a pension comparable to the Employees’ Pension Scheme (EPS). The EPFO is responsible for paying this pension.

If you decide to quit the exempted PF firm, If you go from one exempted PF business to another, you can transfer your amount to the new company. You can transfer your balance to the EPFO if you transfer to an ordinary EPF registered firm. You will be deemed unemployed if you shift into the unorganized sector/self-employment. In this scenario, you can either keep your balance alone or withdraw it (after 2 months of unemployment). If you leave your sum with your previous employer, the interest on it will be taxed.

Rating of Exempted PF 

Private PF trusts must file monthly filings with the EPFO and are graded by the organization. The EPFO assigns a rating to exempted PF trusts based on six criteria. They are as follows: timely transfer of provident fund, timely investment of funds, timely remittance of money to the trust, interest declared at or above PF rate, timely settlement of claims, and audit. The most recent rating may be seen here.

Benefits of Exempted PF

  • Increased efficiency. Members of exempted PF trusts pay an administrative charge of 0.18 percent rather than 1.1 percent.
  • Higher returns: Private PF trusts are permitted to declare interest rates that are higher than the EPF.
  • Better service: EPFO service is seen as sluggish and unsatisfactory in terms of customer satisfaction. A higher degree of service can be provided by a private PF trust.
  • Private PF trusts are taxed in the same way as ordinary EPF members. Section 80C allows employees to deduct up to Rs 1.5 lakh in PF payments. Employer contributions are tax-free. The interest on private PF trusts is tax-free. However, if the employee leaves before completing a 5-year service period, the employer contribution and interest are taxed.

Viewing the Balance of an Exempted PF Trust

In the event of an exempted PF trust, despite receiving a UAN, you cannot check your EPF passbook or make a withdrawal request online. You must either contact your company’s human resources department or check your pay stubs for contributions.

PF Transfer from Unexempted to Exempted

To begin, go to the EPFO website and log in using your UAN Number. A member must go to an EPF account (Transfer) request and submit a transfer request via the online services option. Online claims verification is also available. Claim status may be viewed by selecting Track Claim Status from the online services menu. The funds are transferred from the previous employer to the new employee within a few days. You will not be able to access your funds on the UAN website until they have been moved to the recognized institution. You must contact the trust for this.

Details Required to Transfer

An employee would require the following:

  • Bank account details
  • Mobile number

Exempted EPF – FAQs

Q1. Which form do I need to transfer my PF?

Fill out a Transfer Claim Form – Form 13 (Revised) and send it to the PF A/C with Exempted Establishment, specifying the Trust Name and Address.

Q2. How do I find out if my PF is exempted?

In the event of an exempted PF trust, despite receiving a UAN, you cannot check your EPF passbook or make a withdrawal request online. You must either contact your company’s human resources department or check your pay stubs for contributions.

Q3. How does the PF trust work?

The EPFO has authorized a trust. Both the employer and the employee of the PF trust pay 12% of their earnings to the PF. The EPFO manages the Employees’ Pension Scheme (EPS), not the exempted PF trust, and receives 8.67% of the 12 percent employer contribution.

Q4. Can I withdraw from my PF trust?

If your account is with the company’s PF trust, you must contact your HR department to begin the withdrawal procedure. There are two sorts of withdrawals from a Provident Fund Account: partial withdrawals and full withdrawals.

Q5. Do I get interested in the scheme?

Despite the EPFO declaring an 8.5 percent interest rate for FY20, these EPFs offer yields ranging from 4.5% to 6.6 percent and have exempted PF trusts to match. Experts proposed transferring risk to subscribers rather than provident funds as a remedy to this mismatch through unitisation.