Kumar (name changed), who heads finance in a diversified conglomerate, is extremely worried about his companys Rs 100-crore provident fund (PF) corpus.
Based on a 2006 budget amendment to the Income Tax Act, he has to get his companys provident fund trust certified by central and regional provident fund commissioners under the labour ministry to earn an income tax break.
Like Kumar, hundreds of corporate provident fund trust managers across India managing thousands of crores of rupees are in a fix following last years amendment. Several have been paid visits by touts offering to help them obtain these approvals for a fee.
Corporate PF trusts cover employees whose monthly salary exceeds Rs 6,500 and were outside the purview of the governments Employees Provident Fund schemes. Till last year, PF trusts that followed mandated investment norms were simply recognised by the income tax authorities for exemptions.
The amendment now makes it compulsory for corporate PF trusts to comply with the Employees Provident and Miscellaneous Provisions Act, 1952, and to claim exemptions under Section 17 of the same Act.
That means that these PFs trusts are subject to two sets of regulators the Income Tax Commissioner and the Provident Fund Commissioner.
It may take over a year for companies to get approval under section 17, said A S Mehta, vice-president in charge of corporate accounts at JK Industries.
Though the deadline for complying with the change in the Act was March 31, 2007, few companies have done so because they expect some clarification in Budget 2007-08.
The Federation of Indian Chambers of Commerce and Industry has already made several representations to the finance ministry to scrap the amendment or exempt existing PF trusts from its purview.