The Employees Provident Fund Organisation (EPFO) vide circular No. E.III(10(122)/2024/Circular/Exemption/ 5435 dated 07.10.2024 has prohibited exempted trusts from utilizing their reserves and surplus for distribution of interest among the beneficiaries. The EPFO, in the said circular, states that increasingly exempted establishments are seeking permission from Regional Offices to appropriate the balance lying in the Trusts Reserves and surplus by crediting interests to the existing Trust beneficiaries at a much higher rate than that declared by EPFO for its members. It further states that these actions by the exempted establishments have been proposed either during the time of Surrender of exemption or undertaken just prior to the initiation of surrender process.
The EPFO, after taking into consideration the legal ramifications of such requests, came up with the following legal reasonings/maxims:
Non distribution of earnings: An inflated surplus in the Balance Sheet of the Trust is indicative of non distribution of earnings of previous years amongst the incumbent...
