Home » World News » FinMin may extend IT exemption to private PF trusts till Mar 2013

FinMin may extend IT exemption to private PF trusts till Mar 2013

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NEW DELHI: The Finance Ministry is likely to extend the income tax exemption on retirement benefits to private PF trusts for the current fiscal.

The extension of IT exemption is likely to be part of the Finance Bill 2012, which will come up for discussion in the Lok Sabha on May 7, a Finance Ministry official told PTI.

“The ministry is considering the matter and the amendments may come in the Finance Bill. The exemption is likely to be extended to March 31,2013,” the official said.

Earlier this month Labour Minister Mallikarjun Kharge had written to Finance Minister Pranab Mukherjee to consider extending the time-limit for private PF trusts to seek exemption from income tax on retirement benefits.

About 46 lakh subscribers of such trusts face the threat of their retirement funds coming under tax net as Budget 2012-13 is silent on this issue.

“I would also request to consider extending time-limit expiring on March 31, 2012, for private PF Fund to get exemption for EPFO Act to up to March 31, 2013 so that enough time is available to process the eligible cases by EPFO,” Kharge had said in his letter.

In 2006, the then Finance Minister P Chidambaram had made it mandatory for all such PF trusts to seek exemption certificates from the Labour Ministry within a year for enjoying the tax benefits.

Since all these trusts could not get the exemption certificates in that year, successive budgets have given annual waiver on request from the Labour Ministry.

Out of 2,700 trusts, only 284 have so far been given the exemption certificates from the Labour Ministry while 400 applications are under process.

Kharge, in his letter, also assured the Finance Ministry that the process of issuing exemption certificates to these trusts would be expedited and completed within the current fiscal.

The issue has serious implications for both employees and employers. In the absence of waiver, annual accretion to the PF is considered part of salary and is thus taxable.

Secondly, income generated out of investment of the trust would also attract tax.

Moreover, deduction allowed to employers on contribution to the PF fund would also go in the absence of waiver.

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