SEMINAR
ON PROVIDENT FUND & RETIREMENT BENEFITS
30, NOVEMBER, 2008, NEW DELHI—A REPORT
B.N.SOM, Secretary General
The Seminar on “Provident Fund & Retirement Benefit” was
organized by our Association in collaboration with PHD Chambers of
Commerce and Industry on 30th November 2007 at PHD House, New Delhi.
The objective of the Seminar was to discuss the issues arising out of the
latest amendments in the Finance Act 2006. An apprehension had gained
ground in the industry that the said amendments would pave the way for an
end to PF Trusts because once a PF Trust ceases to be recognized under the
IT Act, deductions would no longer be allowed from the business income. It
would also affect application of the benefit under Section 80C of the Act to
an employee unless the Trusts were able to obtain exemption from the EPF
authority under the EPF Act by the target date notified in that regard. The
other problem faced by the establishments who are already enjoying the
benefit of “Deemed relaxation” under Para 79 of EPF Scheme 1952 was that
already over 700 applications for exemption are pending and more would be
added to that number only to clog the EPF administrative machinery.
Further to that there are PF Trusts to which the EPF Act does not apply.
Those are recognized by the IT Act. In the circumstances there is a lot of
confusion as to how such Trust who would apply for exemption under the
EPF Act which is not applicable to them. The difficulty voiced is that the
existence of such Trusts is in jeopardy. It has also been pointed out that the
amendments introduced are both vague and complex in nature and that such
ambiguity in the rules would lead to avoidable litigation with a cost to the
economy. It has been further pointed out that more than 37 lacs of members
stand to be adversely affected and because of that amendment, the Trust
under the IT Act would be forced to deposit their funds with the EPFO and
this would only escalate the liability of the EPFO by paying interest at
higher rate than the earnings of PF. Thus, with additional fund coming to
the EPF, the financial implication would be shattering for that organization
2.
Besides, the Seminar also intended to offer a free and frank forum for
discussion of the problems of delivery of service by the EPFO to each
member in the matter of coverage, allotting code numbers, their redressal
settlement system, the ways and means of enhancing the return from
investment, how pension fund regulatory authority can protect the
subscriber’s interest and the benefits under the EPS 95.
3.
The Seminar generated intense response from the members of the
PHD and about 100 delegates participated in the Seminar. Shri A.J.
Majumdar, Member, CBDT presided over the inaugural function. President
PHD Chamber, Shri Sanjay Bhatia, Central PF Commissioner, Shri A.
Vishwanthan, Chairman, Provident Fund Regulatory Development
Authority of India, Shri D. Swaroop, Shri S. Krishnan, Additional Secretary,
Ministry of Labour and Employment, Mr. A.D. Nagpal, Member Central
Board of Trustees, EPFO, Shri Ravi Wig, Member CBT EPFO, Shri R.A
Subramaniya, Dr. A.M. Raju, Director, NATRSS, Shri K.C. Pandey, Addl.
CPFC Pension Shri Sudhakar Basu, Addl/CPFC (Compliance), Shri Sushil
Kumar Jain, Chairman, Pioneer-e-Services Pvt. Ltd., were the distinguished
personalities/experts/Social Security administrators who took leading part in
their Seminar. The event was a great success and several important
recommendations were adopted at the end. Secretary General S.S.A.I.
summed up the recommendations of the Seminar for consideration of the
Ministry of Labour, Ministry of Finance (CBDT) and EPFO. The
recommendations are briefly summed up below.
4.
Shri A.J. Majumdar, Member CBDT, after inaugurating the Seminar
took great care to clarify the doubts and apprehensions regarding
amendment to rules 3 & 4 to Schedule IV to the IT Act. He clarified that the
policy make had felt it necessary to being out the said amendments in the
Income Tax Act not to deprive the PF Trust of the benefits that they were
enjoying but to secure the safety and security of the member of the Trusts so
that their interest were protected at all lines. He further stated that under
these rules the IT authorities do not have any power of enforcement of the
rules of the Provident Fund Trust should any grievance regarding their
violation or grievance regarding denial of any of the benefits of the PF rules
would be brought to their notice. The said amendments have now been
made only to plug the said loophole. The IT authorities found out that
whereas they have only statutory power in giving recognition to the Trust
fund, it is only the CPFC/RPFC under the EPF and MP Act who has
necessary power to enforce the provisions of the EPF Act and EPF Scheme
made there under to safeguard the interests of the fund members. To remedy
this situation, to seek recognition for the RPFC under the EPF Act, to create
provision for the enforcement machinery for implementation of PF Rules by
the respective Trusts it was felt expedient to amend the Rules. Shri
Majumdar stated that consequent on the said amendments, the Trusts were
now required to seek coverage under the EPF Act of 1952 on voluntary basis
(Section (4) of the Act).
5.
Detail discussion followed the speech made by Shri Majumdar. From
the Social Security Association, Shri Subrananya and Shri Som submitted
that the objective behind the said amendments to the IT Rules were
undoubtedly welcome but there appear to be lot of grey areas which need to
be looked into both by the Ministry of Finance which has initiated the
amendments and the Ministry of Labour which is to implement the
amendment laws under the aegis of EPF Act of 1952. They pointed out that
application of the Act 1952 is limited to the list of industries/establishment
notified under that Act. The industries/establishments which are outside the
preview of the Act of 1952 are covered either under the Act of 1925 or are
given recognition under IT Act. Besides, there are also separate central
legislation constituting provident fund for Coal Mine workers, Assam Teal
Plantation Workers, Seamen and the workers located within the territory of
the J. & K State. They submitted that it was a debatable point whether any
direction could be issued to the PF Trusts under the IT Act to seek voluntary
coverage under the EPF Act of 1952. It was also pointed out that processing
of applications for voluntary coverage creates some hurdles as every such
application is to be filed only if the majority of the employees agree to come
under the ambit of EPF Act. These legal hurdles require to be sorted out in
the first instance before any synergy of the conditions of recognition under
the IT & PF t Rules could take place. A suggestion was made that one
option could be to delete the Schedule to the EPF Act of 1952 to make the
process of hassle free. It was also submitted that the Association would
approach the Ministry of Labour and Ministry of Finance (CBDT) as well as
the CPFC with their suggestions in this matter to streamline the procedure
for meeting the requirements of IT Rules and EPF Rules to ward off
litigation in the process. It was also the recommendation of the Seminar that
as the processing of further changes in implementation of the amended rules
would take time, the time limit of compliance by the establishments be
extended for some more time.
6.
Another recommendation of the Seminar was that instead of having
multiple provident fund authorities for various segments of the work force,
all Funds should be merged into one by constituting a regulator for the
management of these Funds. There was, however, divergence views
whether EPFO could be made the regulator as it was also one of the players.
This matter was left for further discussion to formulate a definite line of
action in this matter.
7.
On the issue of voluntary coverage, the participants expressed
difficulties faced by them in obtaining coverage of this nature. Very often
several vague queries are thrown up by the EPF authorities and the
applications are subjected to rigorous scrutiny at the regional level. The
overwhelming view was that if an application was made for voluntary
coverage it should receive attention in the EPF Office in that spirit only. The
question of pre-coverage audit of the establishments should not at all arise.
8.
The majority of the participants were of the view that obtaining
exemption under the Act of 1952 more often than not had become a tortuous
and long-drawn process. The EPF authorities, however, stated that they had
carried out streamlining of the process of examining such applications and
that lot of cases was being settled within a short span of time. It was assured
from their end that if an application could be submitted complete in all
respects, the exemption processes would not be a long-drawn one.
9.
There was a lot of discussion on the redressal settlement machinery
and its efficacy. It was claimed by the EPFO authorities that there had been
decline in the matter of registering new grievances. A few innovative
measures taken in this regard were also discussed. It was also highlighted
by the EPF authority that in the Southern part of the country, EPFO has set
up EPF District Information Centres for the benefit of the members located
in the remote areas. The organization intended to replicate this model all
over the country. It was decided to approach CPFC to set up in other parts
of the of the country similar information centres.
10.
A presentation was made by a fund expert from the ITC sharing their
experience how ITC Retirement Benefit Funds were being able to earn
higher income by following the revised guidelines for investment issued by
the Ministry of Finance for the private trusts. He clarified that they were
able to earn a higher return without sacrificing the tenets of safety and
security in investment. Definitely the ITC model was a good learning point
and it would help the Association in pushing the matter with the CBT to
follow suit the experience of the private trusts.
11. Additional CPFC (Pension) explained the various benefits of the EPS95,like, the benefit of past service, the scheme benefit and how benefits
under the scheme could be optimized. Responding to the problem of
certification of the age of a pensioner for pension settlement, he clarified that
should the member question the date of birth as it was appearing in the
employee’s records, the member would have to produce either the birth
certificate issued by the competent authority or the matriculation/ school
learning certificates as those are the only documents which are admissible in
any court of law for proving date of birth of an individual. He also explained
the latest policy for entertainment of disablement pension. It was clarified
that disablement would not necessarily imply cent percent disability. It
means a person becoming medically unfit, making him unable to do any
living by pursuing any economic avocation and such a state of health is to be
certified by a medical board. It is only on certification by an authorized
medical board, disability pension is paid.
12. Following the recommendation of the Seminar a proposal has
been taken up with at the level of Finance Minister and Labour Minister by
the President of our Association. We have also requested our patrons,
PHDCCI New Delhi also to agitate the issue before the government for an
early solution.
The suggestion made by the Association has been
accepted by the Ministry of Finance and the date for
compliance with the amended rules has since been extended up
to 31 March, 2009.
13.
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