Existing PFs to stay recognised: Govt

The finance ministry has said the existing provident funds will continue to be recognised under the Income-tax Act for the purpose of tax breaks, if the establishment is exempt under section 17 of the Employees' Provident Funds and Miscellaneous Provisions (EPF & MP) Act, 1952.

"There is no move to 'de-recognise' any fund as has been apprehended in some quarters," an official statement said today.

It said Clause 56 of the Finance Bill, 2006, had proposed to insert a new condition, in addition to the existing ones, to be fulfilled by a recognised provident fund of any establishment to be eligible for recognition under the Income-tax Act.

Under the Income-tax Act, a recognised provident fund enjoys certain tax benefits. For this purpose, a provident fund is considered as "recognised" if it fulfills the conditions prescribed in the Act.

"Such recognised provident funds are required to fulfil the new condition by 31.3.2007 to continue enjoying the recognition under the Income-tax Act," it said, adding that the new condition only sought to provide legislative synergy between the Income-tax Act and the EPF & MP Act.

The new condition is that the fund, set up by an establishment, should be recognised under the Employees' Provident Funds and Miscellaneous Provisions (EPF & MP) Act, 1952, and such establishment should be exempted from the operation of all or any provisions of any scheme referred to in Section 17 of that Act, it said.

All new funds of any establishment will get recognition under the Income-tax Act only if they fulfil this new condition in addition to all existing conditions prescribed under the Income-tax Act, it added.