SECTION 2(38) l RECOGNIZED PROVIDENT FUND

21. Provident fund exempt under section 17(1) of the Employees’ Provident Fund Act, 1952 - Whether recognition by the Commissioner necessary before it can enjoy benefits of recognised provident fund

1. Reference is invited to Board’s Circular F. No. 44/14/64-ITJ, dated 22-3-1965 [Annex] on the above subject.

2. I am directed to say that the Board has re-examined the contents of its circular referred to above. According to section 2(38), the term “recognised provident fund” means a provident fund which has been and continues to be recognised by the Commissioner in accordance with the rules contained in Part A of the Fourth Schedule and includes a provident fund established under a scheme framed under the Employees’ Provident Fund Act, 1952. It would thus appear that in order to avail of the benefits of the Income-tax Act, a provident fund has either to be recognised in accordance with the provisions of the Income-tax Act or it must be established under a Scheme framed under the Employees’ Provident Fund Act, 1952. The funds which are not established under the Employees’ Provident Fund Scheme, 1952, have to be expressly recognised by the Commissioner under rule 3 of Part A of the Fourth Schedule to the Income-tax Act before they can be covered by the definition in section 2(38).

3. When a fund is exempted under section 17 of the Employees’ Provident Fund and Family Pension Fund Act, 1952, it is implicit that it is not established under the Employees’ Provident Fund Scheme, 1952. It has, therefore, to be recognised by the Commissioner under the relevant provisions of the Income-tax Act before it can enjoy benefits of a “recognized provident fund” under the Act.

In view thereof, Board’s Circular No. 44/14/64-ITJ, dated 22-3-1965 is withdrawn with immediate effect.

Circular : No. 153 [F. No. 215/22/71-IT(A-II)], dated 30-11-1974.

ANNEX - CIRCULAR, DATED 22-3-1965 REFERRED TO IN CLARIFICATION

According to section 2(38) recognised provident fund means a provident fund which has been and continues to be recognised by the Commissioner in accordance with the rules contained in Part A of the Fourth Schedule and includes a provident fund established under a scheme framed under the Employees’ Provident Fund Act, 1952. A question was raised as to whether private provident funds (as distinguished from provident funds maintained by the Central Board of Trustees constituted under the provisions of the Employees’ Provident Fund Scheme) which were or are exempt under the provisions of section 17(1) of the Employees’ Provident Fund Act, 1952, and/or under Para 79 of the Employees’ Provident Fund Scheme, 1952, will be covered by the definition of recognised provident fund under section 2(38). Such funds are not established under either the Employees’ Provident Fund Act or under the Employees’ Provident Fund Scheme. As such, they do not fall within the terms of the definition under section 2(38) and cannot automatically get recognition under the Income-tax Act. In order to get the benefits of recognition, they will have to apply for recognition under Part A of the Fourth Schedule.