Employers may also set up Pension Fund scheme as an alternative to Gratuity and Provident Funds as allowed by standing order 12(6) of the Industrial and Commercial Employment.
All the contributions made into the pension fund account of an employee is allowed as a deductible expense for the employer;
Employers may start pension Fund as a retirement plan. Kifayah provides complete assistance in setting up the scheme. Following steps are usually involved:
- Introduce pension Fund as a scheme after approval from Board;
- Employee and Employer could contribute as per scheme;
- Open Individual Pension Accounts (IPA) of each employee with AMC;
- Select investment policy from options between low risk to high risk;
- Contribute periodically by a single cheque to IPAs;
- Each employee will have access to his investment account online.
The total contribution made to pension fund account of employee is eligible for tax credit.
We help employers to implement a scheme for employees. Please contact us for further details.
Historically, employees could not choose allocation of their investment in Provident Fund and they had to rely on the decision of Trustees for management of amount in Provident Fund Trust. However, through an amendment in Rule 103(1) of Income Tax Rules, 202 now, employees are empowered to transfer their balances in provident fund to their pension fund accounts. This enables employee to choose:
- preferred investment allocation in Pension Fund;
- pension fund manager, based on performance and
- utilize the amount to obtain tax credit.
The following steps are to be followed:
- Request employer a permanent withdrawal under Rule 103 of Income tax rules;
- Open account with Pension Fund; and
- Trustees to transfer accumulated balance or part thereof directly from Provident Fund account to the Individual Pension Account (IPA) of employee.
The transfers into IPA are not eligible to tax credit. These amounts could be withdrawn anytime without tax from the IPA.
Employer might need to make amendment in their trust deed to this effect. We can review to assess.
We help employers to implement a scheme for employees. Please contact us for further details.
