Running an exemptedPF trust well.

An exempted provident fund trust is a promise, made by an employer to its people, that they will be no worse off than if their savings sat with EPFO. Keeping that promise is mostly a matter of records.

What an exempted trust is

Most employers deposit provident fund contributions with the Employees' Provident Fund Organisation. An establishment can instead be exempted and run its own fund through a board of trustees. The exemption was granted under section 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952; under the Code on Social Security, 2020 the power to exempt sits in section 143.

The trust collects the contributions, invests them, credits interest to each member, settles claims and transfers, and reports to EPFO. The employer remains responsible for the result.

The conditions that come with it

Each exemption order carries conditions. The details vary, but the recurring themes are consistent:

• Parity. The trust's rules must be no less favourable to members than the statutory scheme.
• Interest. Interest credited to members must not be lower than the rate EPFO declares for the year. If the trust's investments earn less, the employer makes good the shortfall.
• Investment pattern. Money must be invested in the pattern the Government notifies: prescribed categories of securities, in prescribed proportions.
• Timely transfer. Contributions deducted from salaries must reach the trust within the time allowed.
• Returns and charges. The trust files returns with EPFO and the establishment pays the charges EPFO levies on exempted establishments.
• Audit and inspection. The trust's accounts are audited every year and are open to EPFO inspection.

Breach of conditions can lead to cancellation of the exemption, with the fund transferred to EPFO and any shortfall recovered from the employer.

Why the trust needs company-grade books

A trust's books are often kept as an afterthought, by someone whose main job is elsewhere. That is where problems start. Three reconciliations do most of the work:

When all three agree, the trustees can see at any time that the fund is whole, correctly allocated and correctly invested. When any one fails, the gap tends to grow quietly until an interest declaration, an audit or a large settlement exposes it.

The trust's month and year

• Every month: contributions received and posted member by member; the pension share remitted to EPFO; bank and investment reconciliations; the monthly return.
• Every quarter: a trustee pack with the portfolio, maturities, claims settled, transfers and exceptions.
• Every year: the interest rate approved by the trustees (not below EPFO's declared rate), interest credited, member statements issued, accounts prepared and audited.
• On demand: withdrawals, final settlements and transfers in and out, each worked, checked and approved by the trustees.

The move to the Social Security Code

The Code on Social Security came into force on 21 November 2025. It carries forward the idea of exemption, and the existing provident fund schemes continue during the transition while new schemes are framed. Trustees should expect EPFO to revisit formats, returns and conditions as the new schemes arrive.

EPFO has also been bringing trusts into line. The Employees' Provident Fund Scheme, 2026, notified on 29 June 2026 (GSR 525(E)) and explained in an EPFO circular of 11 July 2026, opened a six-month amnesty, to 28 December 2026, for establishments running provident fund trusts without a formal exemption order. It lets them regularise their status, provided members received contributions and interest at least equal to the statutory rates, with audited accounts and a compliance review.

The test the amnesty applies is the one every trust should be able to pass on any day: can you show, member by member and year by year, that no one was worse off?

Warning signs for trustees

• Member ledgers are updated only at year end.
• The sum of member balances does not agree with the trust's assets, and the difference is "known".
• Interest has been declared without a working that shows it is covered by income.
• No one can produce the portfolio compared with the notified pattern.
• Claims are settled from spreadsheets that do not tie back to the ledger.
• Trustee minutes do not record the decisions the ledger reflects.

A checklist for trustees

1. Read the exemption order and list every condition, with an owner and evidence for each.
2. Require the three reconciliations every month, reviewed by someone who did not prepare them.
3. Approve the interest rate only with a working that shows income, reserves and any employer top-up.
4. Review the portfolio against the notified pattern every quarter.
5. Confirm the pension share reaches EPFO every month.
6. Minute every decision on investments, interest and claims.
7. Plan for new formats and schemes under the Social Security Code.