Whether A Company Can Be Exempted From Paying PF?

The first thing that comes to mind while hearing the name “exempted company” is, What is an exempted company?. An exempted company is the company which has not registered under the EPF Act and has given other similar facility to the employees. In other words, an exempted company is the type of company where the employees do not have an EPF account.

A company can become exempted from EPFO if the organization provides any similar benefits to the employees. Many companies like TCS and Wipro have their own form of PF for their employees. There are 1375 exempted companies in India, out of which some are TCS, Wipro, Hindustan Unilever, and Reliance.

Under Section 17 of the EPFO Act, if an organization maintains its own account of PF for its employees, then that company is an exempted company. Yet, there are certain rules which the EPFO has stated for a company that wishes to be an exempted company.

• A company that is less than 3 years old, like a start-up company, cannot opt for being an exempted company.
• An organization or industry which is registered under the Societies Act cannot be an exempted company.
• Those companies under the control of the central government or the state government are not eligible to be an exempted company.
• The companies which are under the State or Central Government cannot be exempted.

These rules are meant to protect the future of the employees from having a peaceful post-retirement life. But what is the benefit of being an exempted company? Why does a company look forward to being an exempted company? The answers to all of these questions are discussed below.

Benefits Of Exempted PF Trust

There are several benefits that an exempted PF trust has over the EPFO. The most important benefits are stated below.

• An exempted PF Trust is more efficient over EPFO. The reason is that an exempted PF Trust has to manage the PF of the employees in one organization only. At the same time, EPFO has to manage the PF of many companies.
• Another benefit is that the members of the exempted PF Trust only have to pay 0.18% as administration charge, unlike the members of EPFO who have to pay 1.1% as an administration charge.
• Private PF Trust ensures higher interest rates, which means higher returns. The EPFO does not provide high-interest rates.
• EPFO is slower as compared to private Trust. As EPFO has to manage the portal for most of the country’s companies, the system is slower. At the same time, private PF Trust is efficient and faster and has quality services.

Yet, the tax on both EPFO and private PF Trust is the same. Each EPF account, whether it is from EPFO or a private Trust, is liable for tax deduction up to 1.5 lakh, as stated under Section 80C.

Contributors In Private PF Trust

As it is known that in EPFO, the contributors to the EPF account is both the employee and employer. The same is the case for private PF Trust. Here, both employees and employers have to contribute to the PF account.

Both the contributors have to contribute 12% of their salary to the PF account. As per the rules, 8.67% of the employer’s contribution is transferred to the pension plan. The rest of the contribution is then transferred to the EPF account.

Interest Rates On Private PF Trust

When it comes to interest rates, it is quite higher in the case of Private Trust. Here, the employees can opt for higher interest rates, which results in higher returns.

Unlike EPFO, the interest rates of a private PF Trust can vary as per the organization’s request. In such private companies, the employees get higher returns on their EPF amount. This results in higher return rates at the time of retirement.

Withdrawal From Exempted OF Trust

The withdrawal from an exempted PF Trust is like that of EPFO. At the age of 58, the employee can claim the pension amount from the EPF account in private companies.

If an employee remains unemployed for a month, then he/she can withdraw 75% of the EPF balance. In case the employee remains unemployed for 2 months, he/she can withdraw the remaining 25% from the EPF. If you think it would be difficult to transfer your private PF account to an EPF account while switching jobs, you are wrong. The transfer of accounts while switching jobs is easy. You can transfer your private PF account to your new job as an EPF account and can even transfer the balance to the EPFO account.

But, if an employee is switching to an unorganized company or is starting a business, then he/she is unemployed.

How To Know If A Company Is An Exempted Company?

If you have joined a new company and do not know whether the company is an exempted company or not, then the steps below will help you in finding that out.

Here are the steps that would help you know whether your company is an exempted company.

• Firstly, you need to visit the official EPFO India Portal.
• After visiting the website, you need to click on the “dashboards” option from the EPFO corner menu on the home page.
• After doing that, click on the MIS option. Here, you would get to see various options. From those options, click on the “Establishment Search” option, which you can find under the “Office” tab.
• You would be taken to a new window, where you need to provide the establishment’s name, the code number, and the captcha code. After filling out the details, you have to click on the “Search” option.
• Once you get the name of your organization, click on the “View details” option.
• Now, under the establishment status, you would see whether the establishment is an exempted one or an unexempted one.

FAQs

Conclusion

Many private companies have shifted to private Trust for providing their employees with the benefit of the pension scheme. Private PF Trust is a lot more beneficial as compared to EPFO, as stated above. It is highly efficient, provides better interest rates, and is easy to understand too. Due to better returns, the employees in a private organization get a better amount of pension, as compared to EPF accounts. One can even transfer his/her PF account to EPFO while switching jobs without any problem.