Employees Provident Fund Registration
PROVIDENT FUND LAW & LAWYERS IN PAKISTAN
How KLA Pakistan Can Help?
We realize that the system for Provident registration is legally very complicating and problematic. But KLA Pakistan can surely save you from red-tapism. We understand that providing retirement benefits to employees is a statutory obligation, so we determine to straighten all the knots in this process.
KLA Pakistan can get your company register for Provident Fund without any chaos. The expertise of our team and its comprehensive knowledge about the procedures and the laws will assist you in the whole process.
The drafting of Rules to approve tax exemption, KLA Pakistan is devoted to helping you in the entire journey. Contact us at the earliest for further details, and we assure you to provide the most reliable service in the town.
Provident Fund
Provident fund is a retirement scheme aim at the welfare of the employees. It’s an investment fund contribution by both employees and employers, which presents a lump-sum payment at retirement to the employees. Provident Fund is founded as a Trust by the Establishment after registration from the concerning Sub-Registrar, to act as an autonomous body.
The Provident Fund is of three kinds, which are:
Statutory Provident Fund
It establishes under the Provident Fund Act, 1925 and keeps primarily by the Government, semi Government organizations, local authorities, and similar bodies. The payments made from this Fund are neither liable to Income Tax nor recognize by the Commissioner Inland Revenue.
Recognised Provident Fund
The Commissioner Inland Revenue documents it under the Sixth Schedule of Income Tax Ordinance, 2001. Private sector institutions establish the Provident Fund of this nature. The payments from this Fund are also not subjecting to Income Tax.
Unrecognized Provident Fund
This kind of Provident Fund is not exempting from taxes. But it is not taxing on a year-to-year basis. Only once the payment disburses to the employee, then the employer’s grant and interest yields are liable to be taxing.
How Should Provident Fund Trust Deed and Rules Consist of:
The trust gathers the capital from employees and employers every month and invests in legitimate securities and projects.
The employer builds the Provident Funds as a final and binding Trust, named after the company’s name, followed by the “Employees Provident Fund” quad-gram. The trust administers by three to five trustees whose names write on Trust Deed and sign on a Stamp Paper. The Rules of Provident Fund Trust are formulating separately. The Trust Deed and Rules include all the contractual terms regarding the rights, duties, and liabilities of the trustees, employer, employees, auditors, and bankers, etc., in detail.
The Trust Deed should include all the information necessary for the operations and handling of the trust. It must also contain complete regulations for the membership and the organization’s role and power in managing the fund. The policy of contributions, investment of fund’s capital, division, and dispersion of profits, settlement of disputes should be stated clearly and comprehensively in the Trust Deed.
It is obligatory to register Trust Deed with the Registrar of Trust. For the registration, one trustee has to appear before the Registrar on behalf of all the trustees. The original Trust Deed and the photocopy of Rules, copies of National Identity Cards, and two photographs (Passport size) of all the trustees are submitting to the Registrar. Following this procedure, the trust and all the trustees must obtain their respective National Tax Numbers (NTNs).
Tax Exemption Implications on Provident Fund:
After the registration, the Trust has to apply for exemption from tax under Part I of the Sixth Schedule of the Income Tax Ordinance, 2001, before the Commissioner Inland Revenue. The Provident Fund enjoys a lifetime exemption from taxation after the application is accepting. Part I of the Sixth Schedule of the Income Tax Ordinance, 2001, has complete terms for approval.
Following are the conditions for approval:
- All the employees should become employed in Pakistan, or the employer should be a legal resident of Pakistan.
- If only 10% or fewer employees are employing outside Pakistan, then the non-resident employer also qualifies for tax immunity.
- The amount deposited by the employer in the Provident Fund shall not exceed the employee’s contribution.
At the end of the year, the revenue is distributing on the closing balance. The profit should ideally calculate on average balance.
The employees enjoy various benefits when part of the Provident Fund. They entitle to get loans or to withdraw their money temporarily. They can even withdraw their funds permanently, but this is allowing in some special conditions. Above all, the members have the facility of an interest-free loan. There are precise circumstances and boundaries for the eligibility of loans. But, we mention in the Rules along with the complete procedure.
