The Trust-Transfer Mechanism
A recognised provident fund or an approved gratuity fund is held by trustees under a trust deed. The transfer of the fund to the transferee’s trust requires an amendment to the trust deed, the consent of the trustees, and compliance with the conditions of recognition or approval. The NCLT’s scheme clause that deems the transferor’s trusts to become the transferee’s trusts is necessary but not sufficient; the trust law and the regulatory approvals must also be satisfied.
The PF Exemption and Recognition
Where the transferor maintains an exempted provident fund under the EPF Act, the exemption is specific to the establishment. On transfer, the exemption does not automatically travel to the transferee. The transferee must apply for a fresh exemption or transfer the accumulations to the EPFO or to its own exempted fund. The scheme should provide for the continuity of the fund and the protection of the employees’ accumulations during the transition.
The Gratuity Fund Approval
An approved gratuity fund under the Income-tax Act enjoys tax benefits. The transfer of the fund to the transferee requires the approval of the Commissioner of Income-tax (Exemptions) or the prescribed authority. The scheme should identify the approval requirement and the timeline, because a delay in the approval can affect the deductibility of contributions and the tax treatment of the fund’s income.
The Employee Consent and Communication
The transfer of retirement benefits is an employee-facing event. The scheme should provide for communication to the employees explaining the continuity of their benefits, the new trust arrangement, and the process for claiming benefits. A failure to communicate can lead to grievances and disputes, even if the legal transfer is valid.
Call to Action: For PF/gratuity trust transfer documentation, exemption transition, or employee communication, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.