Kharge writes to FM on I-T exemption to private PF subscribers

Labour Minister Mallikarjun Kharge has 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.

"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 said in his recent letter to Mukherjee.

In 2006, 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 has assured the Finance Ministry in his letter that the process of issuing exemption certificates to these trust would be expedited.

"I am directing the EPFO to launch a special drive to ensure process of all eligible cases in time bound manner so as to complete the exercise within 2012-13," the minster stated in his letter.

Earlier, Labour Ministry had indicated that the Finance Ministry is willing to extend tax exemption to private provident fund trusts in the Budget for 2012-13 in the interest of a "large working population".

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 attract tax. Moreover, deduction allowed to employers on contribution to the PF fund would also go