New Investment Pattern

Surcharge levied if Exempted Trust violates New Investment Pattern

Modifies guidelines for rates of Levy of Surcharge in view of New Investment pattern prescribed by the Government of India vide notification No. 5.0. 1433 (E) dated 29.05.2015 to be levied on BoT of the Exempted/Relaxed Establishments by RPFC on Ale of deviation from the prescribed new investment pattern – Regarding.

The guidelines on rate of surcharge to be levied on Board of Trustees of the exempted/relaxed establishments by RPFCs on account of deviation from the prescribed new investment pattern were circulated vide circular No.- E-111/18(1)04/Sub-Committee/2961 dated 06.05.2014.

The Government of India has since notified a new investment pattern to be followed by Trusts of exempted establishments vide notification No. S.O. 1433(E) dated 29.05.2015. Under the new pattern of investment, some new categories/sub-categories of investment options have been introduced. In view of this development, a need for modification in the rates of levy of surcharge approved earlier by the Sub-Committee was felt.

In view of the new investment pattern prescribed by the Government, the issue of levy of surcharge and its rates was placed before the Sub-Committee of Central Board of Trustees, EPF on Exempted Establishments in its 41 st meeting held on 12.01.2017. After detailed deliberation and recommendation of Sub-Committee of Central Board of Trustees, EPF on exempted establishments in its 41st meeting held on 12.01.2017, the following general guidelines are issued to bring appropriate deterrence on deviation in adhering to the new investment pattern guidelines.

Sr. No.

Investment Category
(Percentage Amount
to be Invested)

Occasion of DeviationRates
1.Government Securities and
Related Investments.
(Minimum 45% and upto 50%)
1st0.25% of amount* in shortfall or excess of prescribed  percentage of investment in the category.
2nd0.50% of amount* in shortfall or excess of prescribed percentage of investment in the category.
3rd1.00% of amount* in shortfall or excess of prescribed percentage of investment in the category.
2.Debt Instruments and Related Investments. (Minimum 35% and upto 45%)1st0.50% of amount* in shortfall or excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
2nd1.00% of amount* in shortfall or excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
3rd2.00% of amount* in shortfall or excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
3.Short-term Debt Instruments and Related Investments. (upto 5%)1st% 0.50 of amount* in excess of prescribed percentage of  investment in the category plus 10% of the surcharge so worked out.
2nd1.00% of amount* in excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
3rd2.00% of amount* in excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
4.Equities and Related Investments. (Minimum 5% and upto 15%)1st0.50% of amount* in shortfall  or  excess  of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
2nd1.00% of amount* in shortfall or excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
3rd2.00% of amount* in shortfall or excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
5.Asset Backed, Trust Structured and Miscellaneous Investments. (upto 5%)1st0.50% of amount* in excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
2nd1.00% of amount* in excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.
3rd2.00% of amount* in excess of prescribed percentage of investment in the category plus 10% of the surcharge so worked out.

Deviation can be regulated by the levy of surcharge within the securities class given in the prescribed new investment pattern only. If the Trust invests in a security/scrip in which investment is not at all permitted, it cannot be said to be a deviation but violation which may attract cancellation/withdrawal of exemption/relaxation.

For the purpose of the extent of deviation, the term “investment surplus” for any financial year shall mean the sum total of fresh contribution receipts of maturity proceeds, commission amount plus any other accruals (including interest on investment) fewer payments and withdrawals.

Any deviation in the patter of investment in any one year prior to 01/04/2014 will be treated as the first occasion as proposed in circular dated 06.05.2014, if the deviation has happened after a gap of three years from the year in which deviation occurred last.

Further, prospective deviation (from 01.04.2014) on a maximum of three occasions may be regularized by the levy of surcharge as stated at Para 9 and any deviation beyond may result in cancellation of exemption or withdrawal of relaxation as the case may be, apart from the levy of surcharge as stated above. Further, the deviation in any one particular year irrespective of approved asset class may mean one occasion.

All the RPFCs In-Charge of Regional/Sub-Regional may levy surcharge at the rates prescribed above to regulate the deviations from 2015-16 onwards.

The amount of surcharge levied shall be paid by the establishment within 30 days from the date of order of assessment. lf the surcharge is not paid within the time so stipulated, it will attract interest at the rate as provided under Section 7Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

These guidelines are general in nature. In any exceptional case, a proposal in writing to vary from the prescribed surcharge in the above guidelines, may be forwarded to ACC (Compliance) for the decision of CPFC keeping the overall interest of the members in consideration.

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