Budget 2011-12 has proposed an amendment retrospectively from 1st January, 2011 to Rule 3 in Part A of the Fourth Schedule which governs recognition of provident fund under income tax law .
Section 36(iv) of Income Tax Act provides for deduction of expense in form contribution to recognized provident fund established for the employee. The important criteria is that the provident fund must be approved by Commissioner of Income Tax . Rule 4 in Part A of the Fourth Schedule to the Income-tax Act provides for conditions which are required to be satisfied by a Provident Fund for receiving or retaining recognition under the Income-tax Act. One of the requirements of rule 4 [clause (ea)] is that the establishment shall obtain exemption under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act).
Rule 3 in Part A of the Fourth Schedule provides that the Chief Commissioner or the Commissioner of Income-tax may accord recognition to any provident fund which, in his opinion, satisfies the conditions specified under the said rule 4 and the conditions which the Board may specify by rules.
The first proviso to sub-rule (1) of rule 3, inter alia, specifies that in a case where recognition has been accorded to any provident fund on or before 31st March, 2006, and such provident fund does not satisfy the conditions set out in clause (ea) of rule 4 on or before 31st December, 2010 and any other conditions which the Board may specify by rules in this behalf, the recognition to such fund shall be withdrawn.
In order to provide further time to the Employees’ Provident Fund Organization (EPFO) to process the applications made by establishments seeking exemption under section 17 of the EPF & MP Act, it is proposed to amend the aforesaid proviso so as to extend the time limit from 31st December, 2010 to 31st March, 2012.
Section 36(iv) of Income Tax Act provides for deduction of expense in form contribution to recognized provident fund established for the employee. The important criteria is that the provident fund must be approved by Commissioner of Income Tax . Rule 4 in Part A of the Fourth Schedule to the Income-tax Act provides for conditions which are required to be satisfied by a Provident Fund for receiving or retaining recognition under the Income-tax Act. One of the requirements of rule 4 [clause (ea)] is that the establishment shall obtain exemption under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act).
Rule 3 in Part A of the Fourth Schedule provides that the Chief Commissioner or the Commissioner of Income-tax may accord recognition to any provident fund which, in his opinion, satisfies the conditions specified under the said rule 4 and the conditions which the Board may specify by rules.
The first proviso to sub-rule (1) of rule 3, inter alia, specifies that in a case where recognition has been accorded to any provident fund on or before 31st March, 2006, and such provident fund does not satisfy the conditions set out in clause (ea) of rule 4 on or before 31st December, 2010 and any other conditions which the Board may specify by rules in this behalf, the recognition to such fund shall be withdrawn.
In order to provide further time to the Employees’ Provident Fund Organization (EPFO) to process the applications made by establishments seeking exemption under section 17 of the EPF & MP Act, it is proposed to amend the aforesaid proviso so as to extend the time limit from 31st December, 2010 to 31st March, 2012.
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