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CHAPTER XV
RECOGNISED PROVIDENT FUNDS, APPROVED SUPERANNUATING FUNDS AND APPROVED GRATUITY FUNDS
Part I
Recognised Provident Funds
91. Application for recognition of provident fund.- (1) An application for recognition of a provident fund shall be made, in writing, by the employer maintaining the fund, setting out the following information, namely:-
(a) the employer’s name and the address of the employer’s principal place of business;
(b) the name of all employees, whether in or outside Pakistan subscribing to the fund;
(c) the place where the accounts of the fund are or will be maintained; and
(d) where the fund is already in existence, a copy of the last balance sheet of the fund and details of the investments of the fund.
(2) A verification in the following form shall be annexed to the application, namely:-
“We/ I, the trustee(s) of the above named fund, do declare that what is stated in the above application is true to the best of our/my information and belief, and that the documents sent herewith are the originals or true copies thereof.”
(3) Subject to sub-rule (4), the application shall be accompanied by the following documents, namely:-
(a) the original of trust deed to be sighted by the Commissioner;
(b) a copy of the trust deed to be retained by the Commissioner; and
(c) the rules of the fund.
Provided that if the original of the trust deed cannot conveniently be produced, the Commissioner may accept, in lieu of the original, a true copy certified either by a Magistrate or in any manner provided for in the Companies Rules, 1984, in which case, an additional copy shall be furnished for retention by the Commissioner.
(4) The application shall be lodged with the Commissioner responsible for the area/ jurisdiction in which the accounts of the fund are kept, or, if the accounts are kept outside Pakistan, lodged with the Commissioner responsible for the area/ jurisdiction in which the local headquarters for the employer are situated.
92. Decision on application.- (1) The Commissioner may make such enquiries and call for such further information or evidence as the Commissioner may consider necessary to decide the application.
(2) The Commissioner shall notify the applicant, in writing, of the Commissioner’s decision on the application.
(3) Where the Commissioner decides to refuse an application under rule, the notice referred to in sub-rule (2) shall include a statement of reasons for the refusal.
(4) Subject to sub-rule (5), an order according recognition to a provident fund shall take effect from the last day of the month in which the application for recognition is received by the Commissioner or, at the request of the employer, the last day of any later month in the same financial year.
93. Withdrawal of recognition.- Where the Commissioner decides to withdraw recognition of a provident fund, the Commissioner shall notify the applicant, in writing, of the Commissioner’s decision and such notice shall include a statement of reasons for the withdrawal.
94. Form of appeal in case of non-recognition or withdrawal of recognition.- (1) An appeal under sub-rule (1) of rule 12 of Part I of the Sixth Schedule to the Ordinance to the Commissioner’s decision to refuse an application for recognition or to withdraw recognition shall be in the following form shall be verified in the manner indicated therein, namely:-
FORM OF APPEAL IN CASE OF NON-RECOGNITION OR
WITHDRAWAL OF RECOGNITION
To
The Central Board of Revenue,
Islamabad/ Before the Commissioner (Appeals)
The petition of _____ employer(s) carrying on business, profession or vocation______ at__________
Your petitioner(s) applied to/obtained sanction from the Commissioner under Part I of the Sixth Schedule to the Income Tax Ordinance, 2001 for the recognition of the provident fund maintained by him (them) for the benefit of his (their) employees. The Commissioner has refused recognition/withdrawn recognition for the reason stated in his order, dated ________, of which a copy is attached.
For the reasons set out below your petitioner(s) submit (s) that the fund should be contained to be recognised and pray (s) that the Central Board of Revenue may be pleased to.
Accord recognition
Continue the recognition.
GROUND(s) OF APPEAL
(1)
(2)
(3)
(4)
(5)
I/We named above petition to declare that whatever is stated above is true to the best of our information and belief .
Name________
Signature_______
Address________
Date_______
(2) An appeal referred to in sub-rule (1) shall be accompanied by a copy of a challan for Rs. 100/- paid in Government treasury.
95. Accounts required to be maintained by a recognised provident fund.- (1) A recognised provident fund shall prepare accounts at intervals of not more than twelve months.
(2) An account shall be maintained for each subscriber to the fund and it shall include the particulars shown in the following form, namely:-
Account closed.
Date
Paid to employee
Lapsed to the employer
Or to fund
Recovery by employer
Name__________________ Date of joining Fund__________________
Annex
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Contribution by the Employer |
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Month and year. |
Salary. |
By employees |
Normal |
Of contingent nature, |
Total in columns 3,4,5. |
Total interest on the amount shown in column 6. |
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1 |
2 |
3 |
4 |
5 |
6 |
7 |
Balance brought forward
July __________________________
August ________________________
June _________________________
Total: ________________________
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Exempt |
Not exempt |
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Employer’s contribution not exceeding statutory limit. |
Interest on sum in Column 6 at % but not exceeding statutory limit |
Contribution Column 4+5 minus Column 8 |
Interest Column 7 minus Column 9. |
Additions to total income 10 plus Column 11. |
Remarks. |
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8 |
9 |
10 |
11 |
12 |
13 |
Adjustment on account of temporary
Withdrawals account (Column 8 and 9 only).
Adjustment on account of non-payable
Withdrawals account Columns 10 and 11.
Total carried over.
If desired column 7 may be divided into sub-columns showing separately the interest on columns and columns 4 and 5 respectively.
____________________________________________________________________________
Non-payable withdrawals Account Temporary withdrawal Account
_____________________________________________________________________________
Amount Advance Repayment
_____________________________________________________________________________
July Balance brought
Forward_______________________
July__________________________
August August________________________
June June__________________________
Total ____________________
(3) The trustees of a recognised provident fund shall furnish to the Commissioner an abstract for the fund’s accounting period of the individual account of each employee participating in the fund whose income under the head “Salary” is Rs. 24,000 or more per annum.
(4) The abstract shall –
(a) be in the form prescribed in sub-rule (2), but shall show only the total of the various columns thereof for fund’s accounting period; and
(b) include an account of any temporary withdrawals by the employees during the year and of the repayment thereof.
(5) The abstract shall be furnished by the trustees to the Commissioner responsible for the area in which the accounts of the fund are kept or to such jurisdiction or functional Division as the Commissioner may, in each case, direct.
(6) Subject to rule, the abstract shall be furnished -
(a) in the case of a company, on or before the first day of August next following the fund’s accounting period or within fifteen days of the expiry of six months from the end of the fund’s accounting period, whichever is later; and
(b) in any other case –
(i) where the fund’s accounting period ends at any time between the first day of July and the thirty-first day of December (both days inclusive), on or before the first day of August next following; or
(ii) in any other case, on or before the first day of October next following the end of the fund’s accounting period.
(7) The account to be made under the provisions of sub-rule (1) of rule 7 of Part I of the Sixth Schedule to the Ordinance shall show in respect of each employee -
(a) the total salary paid to the employee during the period of participation in the provident fund;
(b) the total contributions made by, or in respect of, the employee;
(c) the total interest which has accrued thereon; and
(d) so far as may be, the percentage of the employee’s salary in accordance with which contributions have been made by the employer and the employee.
96. Time limit for submission of accounts kept outside Pakistan.- (1) Where the accounts of a recognised provident fund are kept outside Pakistan, certified copies of the accounts shall be supplied not later than the 15th September in each year to a local representative of the employer in Pakistan.
(2) The Commissioner may, upon application in writing, fix a date later than the 15th September as the date by which the certified copies shall be supplied.
97. Limit on contribution by employers.- The Commissioner may relax the limits fixed under clause (c ) of sub-rule (1) of rule 2 of Part I of the Sixth Schedule to the Ordinance for contribution of an employer to the individual account of an employee in any year provided that such contribution shall not exceed the following limits, namely:-
(a) the employer’s aggregate contribution in any year including the normal contribution to the individual account of any one employee, whose salary does not exceed Rs. 1000 per month, shall not exceed double the amount of the contribution of the employee in that year; and
(b) the amount of the periodical bonuses and other contribution of a contingent nature which may be credited by an employer in any year to the individual account of any one employee shall not exceed the amount of the contribution of the employee in that year.
98. Limit on contributions by certain employees.- Where an employee of a company owns shares in the company with a voting power exceeding ten per cent of the whole of such power, the sum of the exempted contributions of the employee and employer to the recognised provident fund maintained by the company shall not exceed Rs. 1000 in any month.
99. Exclusion from total income of accumulated balances.- For the purpose of rule 4 of Part I of the Sixth Schedule to the Ordinance, the accumulated balance due and becoming payable to an employee participating in a recognised provident fund shall be exempt from income tax and shall be excluded from the computation of total income.
100. Treatment of consideration for dealings with beneficial interest.- If an employee assigns or creates a charge upon his beneficial interest in a recognised provident fund, the Commissioner shall, on the fact of the assignment or charge coming to his knowledge, give notice to the employee that if he does not secure the cancellation of the assignment or charge within two months of the date of receipt of the notice, the consideration received for such assignment or charge shall be treated as salary received by him in the year in which the fact became known to the Commissioner and shall be assessed accordingly.
101. Treatment in certain cases where recognition is withdrawn.- If the Commissioner withdraws recognition from a recognized provident fund, the balance to the credit of each employee at the end of the financial year prior to the date of the withdrawal of recognition shall be paid to the employee free of tax at the time when such employee receives the accumulated balance due to him and the remainder of the accumulated balance due to him shall be liable to tax as if the fund had never been recognized
102. Investment of moneys of a recognised provident fund.- (1) Where the employer is not company as defined in clause (7) of section 2 of the Companies Ordinance, 1984, the contributions made by employees after the date of recognition of a provident fund and the interest on the accumulated balance of such contribution shall be wholly invested either in securities of the nature specified in clause (2)(b),(c),(d) or (e) of section 20 of the Trusts Act, 1882, and payable both in respect of capital and interest in Pakistan or in a Post Office Savings Bank Account in Pakistan or deposited in National Savings, Federal Government securities or deposits in NCBs or NBP, or, in the other government securities, or any other established financial institutions including mutual funds subject to maximum of 20% of such deposits or investment at any time in the year.
(2) Where the employer is a company as defined in clause (7) of section 2 of the Companies Ordinance, 1984, all moneys contributed to a provident fund (whether by the company or by the employees or accruing by way of interest or otherwise to such fund) shall be wholly invested in accordance with the provisions of section 227 of the Companies Ordinance, 1984, or deposited or invested as in sub-rule (1) or with the prior approval of the Commissioner, in purchase of shares of a public limited company offered for sale inviting public offer by the Federal Government so, however, that the securities and deposits in which the contributions made by the employees after the date of recognition of a provident fund and the interest on the accumulated balance on such contributions are invested or deposited are payable in respect of capital, deposit and interest in Pakistan.
103. Permitted withdrawals.- (1) Subject to these rules, withdrawals by employees from accumulated balance may be allowed by the trustees of a recognized provident fund in the following circumstances, namely:-
(a) to pay expenses in connection with the illness of a subscriber or a member of his family;
(b) to meet the expenditure on purchase of a motor cycle or scooter provided that authenticated copies of documents substantiating such purchase are deposited with the trustees of the fund;
(c) to pay the overseas passage by reason of health or education of a subscriber or a member of his family;
(d) to pay expenses in connection with marriages, funerals or ceremonies, which, by the religion of the subscriber, it is incumbent upon him to perform and in connection with which it is obligatory that expenditure should be incurred;
(e) to pay expenses in connection with the performance of Haj by the subscriber;
(f) to meet the expenditure on building or purchasing a house or a site for a house, provided that the documents substantiating the building or purchase of such house, or the purchase of such site, are deposited with the trustees of the fund;
(g) to meet the expenditure on repairs, renovation or extension of a residential house belonging to the subscriber;
(h) to pay premiums on policies of insurance on the life of the subscriber or of his wife provided that the policy is assigned to the trustees of the fund or at their discretion deposited with them and that the receipt granted by the insurance company for the premiums is from time to time handed over to the trustees for inspection by the Commissioner;
(i) to purchase shares of a public limited company for investment as per rules of this Chapter;
(j) in the case of a subscriber who has attained the age of fifty years on the date on which withdrawal is permitted -
(i) subject to sub-rule (2), to meet the expenditure on the purchase of a house or construction of a house on land owned by him or a member of his family anywhere in Pakistan;
(ii) subject to sub-rule (3), to meet expenditure on the purchase of agricultural land from Government;
(iii) to repay a loan taken from a financial institution, provided that the subscriber shall, within a period of two weeks from the date of withdrawal produce satisfactory evidence before the trustees to show that the advance has been utilised for the purpose for which it was drawn failing which the entire amount of withdrawal together with interest accrued thereon shall forth with become repayable to the fund in a lump-sum; and
(iv) without assigning any reason; or
(k) in the case of an employee proceeding on leave preparatory to retirement, at the discretion of the trustees of the fees, without assigning any reason, provided that where an employee rejoins duty on the expiry of his leave, the amount withdrawn together with the interest accruing thereon at the rate allowed by the fund shall be repaid forthwith in to the fund in a lump-sum.
(2) The first instalment of a withdrawal under sub-clause (i) or clause (j) of sub-rule (1) shall be allowed to be drawn only after an agreement has been executed between the subscriber and the trustees of the fund to the effect that the subscriber shall expend the full amount of the said advance towards the purchase or the building of a houses as claimed at the earliest possible opportunity and if the actual amount so expended is less than the amount of permitted withdrawal the subscriber shall repay the difference into the fund forthwith and further that if the said house is sold or otherwise alienated by its owner to any other person while the subscriber is still in service, the subscriber shall forthwith repay into the fund the entire amount of the withdrawal together with interest accrued thereon in lump-sum.
(3) The first instalment of a withdrawal under sub-clause (ii) of clause (j) of sub-rule (1) shall be allowed to be drawn only after an agreement has been executed between the subscriber and the trustees of the fund to the effect that the subscriber shall expend the full amount of the said advance towards the purchase of the said piece of land at the earliest possible opportunity and if the actual amount so expended is less than the amount of permitted withdrawal the subscriber shall repay the difference into the fund forthwith and further that if the said house is sold or otherwise alienated by its owner to any other person while the subscriber is still in service, the subscriber shall forthwith repay into the fund the entire amount of the withdrawal together with interest accrued thereon in lump sum.
104. Limits on Withdrawals.- (1) Withdrawals permitted under these rules shall not exceed the following limits, namely:-
(a) in the case of withdrawals permitted under clause (a), (b) (c) or (d) of sub-rule (1) of rule 103, six months salary of the subscriber or the total of accumulated balance to his credit, whichever is the less;
(b) in the case of withdrawals permitted under clause (d) of sub-rule (1) of rule, six months salary of the subscriber or twenty five thousand rupees or/ of the total of the accumulated balance to his credit, whichever is the lowest;
(c) in the case of withdrawals permitted under clause (f) or (g) of sub-rule (1) of rule, thirty-six months salary of the subscriber or the total of the accumulated balance to his credit, whichever is the less;
(d) in the case of withdrawals permitted under clause (h) of sub-rule (1) of rule, eighteen months salary of the subscriber or the total of the accumulated balance to his credit, whichever is the less, provided that this restriction shall apply to each withdrawal and not to the total withdrawal;
(e) in the case of withdrawals permitted under clause (i) of sub-rule (1) of rule, six months salary of the subscriber or ten thousand rupees or the total of the accumulated balance to his credit, whichever is the lowest;
(f) in the case of withdrawals permitted under sub-clause (i), (ii) and (iii) of clause (j) of sub-rule (1) of rule, twenty-four months salary of the subscriber or eighty percent of the total of the accumulated balance to his credit, whichever is the less;
(g) in the case of withdrawals permitted under sub-clause (iv) of clause (j) of sub-rule (1) of rule, sixty percent of the total of the accumulated balance to the subscriber; and
(h) in the case of withdrawals permitted under clause (k) of sub-rule (1) of rule, ninety percent of the accumulated balance to the subscriber.
(2) For the purpose of rule and this rule:-
(a) “accumulated balance” means the total of the accumulations of exempted contributions and exempted interest contained in the balance to the credit of the employee at the time of withdrawals;
(b) “family” means the employee’s wife, legitimate children, step children, parents, sisters and brothers who reside with the employee and are wholly dependent on him; and
(c) “salary” means the salary as defined in clause (h) of rule 14 of Part I of the Sixth Schedule to the Ordinance to which the employee is entitled at the time when the withdrawal is granted.
105. Second withdrawals.- (1) Save as provided in sub-rules (2), (3), (4) and (5), no second withdrawal from a recognized provident fund shall be permitted until the sum first withdrawn has been fully repaid.
(2) A withdrawal may be permitted for the purposes specified in clause (h) of sub-rule (1) of rule 110, notwithstanding that the sum withdrawn for any other purpose has not been repaid.
(3) Subsequent withdrawals for the purposes specified in clause (h) of sub-rule (1) of rule 103 may be permitted, notwithstanding that the sum or sums previously drawn for the same purpose has or have not been repaid.
(4) A withdrawal for any one of the purposes specified in sub-rule (1) of rule 103 other than that specified in clause (a) of that sub-rule may be permitted notwithstanding that the sum or sums withdrawn for the purposes of clause (e) of sub-rule (1) has or have not been repaid.
(5) A withdrawal for any of the purposes specified in sub-rule (1) of rule 103 other than those specified in clauses (f) and (h) of that sub-rule may be permitted notwithstanding that the sum previously withdrawn for the purposes of clause (d) of sub-rule (1) has not been repaid.
106. Repayment of amounts withdrawn.- (1) Where any withdrawal is allowed for a purpose specified in clause (f), (h), (i), (j) or (k) of sub-rule (1) of rule 103, the amount withdrawn need not be repaid.
(2) Subject to sub-rules (3) and (4), where a withdrawal is allowed for a purpose other than those referred to in sub-rule (1), the amount withdrawn shall be repaid in not more than forty-eight equal monthly instalments and shall bear profit in accordance with the following, namely:-
(a) Withdrawals which are repaid in not The rate of mark-up fixed by the Federal Government
more than twelve monthly instalments. Under rule 3(b) of Part-I of the Sixth Schedule to the Ordinance payable in the form of one additional instalment.
(b) Withdrawals which are repaid in more The rate of mark-up fixed by the Federal Government
than twelve but but not more than under rule 3(b) of Part-I of the Sixth Schedule to the
twenty-four monthly instalments. Ordinance payable in the form of two additional instalments.
(c) Withdrawals which are repaid in more The rate of mark-up fixed by the Federal Government
than twenty-four but not more than under rule 3(b) of Part-I of the Sixth Schedule to the
thirty-six monthly instalments. Ordinance payable in the form of three additional instalments.
(d) Withdrawals which are repaid in more The rate of mark-up fixed by the Federal Government
than thirty-six month instalments. under rule 3(b) of Part-I of the Sixth Schedule to the Ordinance payable in the form of four additional instalment.
(3) For the purposes of sub-rule (2) and at the discretion of the trustees of the fund, profit may be recovered on the amount withdrawn or the balance thereof outstanding from time to time at 1 per cent above the rate which is payable for the time being on the balance in the fund to the credit of the subscriber.
(4) Where an employee contributing to the fund elects not to receive any profit accruing on his accumulated balance, no profit shall be charged on the amount withdrawn by him from the fund.
(5) The employer shall deduct such instalments payable under sub-rule (2) from the employee’s salary and pay them to the trustees commencing from the second monthly payment made after the withdrawal or, in the case of an employee on leave without pay, from the second monthly instalment after his return to duty.
(6) In the case of default of repayment of instalments under sub-rules (2) and (5), the Commissioner may at his discretion, order that the amount of withdrawal or the amount outstanding shall be added to the total income of the employee for the year in which the default occurs and the employee shall be assessed accordingly.
107. Power to relax conditions.- Notwithstanding anything contained in rules 103, 104, 105 or 106, the Commissioner may in special circumstances to be recorded in writing relax the conditions for withdrawals from and repayment to the fund.
APPROVED SUPERANNUATION FUNDS
108. Application for approval of a superannuation fund.- (1) The application required to be made under sub-rule (1) of rule 3 of Part II of the Sixth Schedule to the Ordinance for approval of a superannuation fund shall contain the following information, namely:-
(a) the employer’s name and the address of the employer’s