The government on Thursday clarified that there is no move to derecognise any employees fund as has been apprehended in some quarters because of a proposal in the Finance Bill.
A new condition, proposed in the bill, only seeks to provide legislative synergy between the Income Tax Act and the Employees' Provident Funds and Miscellaneous Provisions Act (EPF&MP), 1952, an official release said.
Clause 56 of the Finance Bill, 2006 proposes to insert a new condition, in addition to the existing ones, which has to be fulfilled by a recognised provident fund of any establishment to be eligible to get recognition under the Income-tax Act, the release said.
The new condition is that the fund, set-up by an establishment, should be recognised under section 17 of the EPF & MP Act.
The relese said new employees funds of any establishment will get income tax benefits if they fulfil the conditions set by the clause in addition to the existing ones.
As regards the existing provident funds, they will continue to be recognised under the Income-tax Act if the provisions of sub-sections (3) and (4) of section 1 of the EPF and MP Act applies and the establishment is recognied under section 17 of the act.
{{/usCountry}}As regards the existing provident funds, they will continue to be recognised under the Income-tax Act if the provisions of sub-sections (3) and (4) of section 1 of the EPF and MP Act applies and the establishment is recognied under section 17 of the act.
{{/usCountry}}Section 1 deals with the extent and scope of the EPF.
All the existing recognised provident funds are required to fulfil the new condition by March 31, 2007 to continue enjoying the recogniton under the Income-tax Act, the release said.
They said unless provident funds are recognised by the Regional Provident Fund Commissioner, both employees and employers will not be able to enjoy tax exemptions on their contributions to the fund.
At present, provident fund contributions are deductible from taxable income.