EPFO overhauls PF trust rules:
Risk-based audits, 2% interest cap on exempted establishments
New Delhi, May 7, 2026
Synopsis
New rules are set for companies managing their own provident fund trusts. Mandatory annual audits are replaced by a risk-based system. Interest rates offered by these trusts will now be capped. Exempted establishments can retain their status after mergers and acquisitions. These changes aim to strengthen oversight and improve ease of doing business.
The government has overhauled rules for companies managing provident fund contributions through their own trusts, replacing mandatory annual audits with a risk-based system and capping the interest rates such trusts can offer employees.
The revised norms also allow establishments to retain their exempted status under the Employees Provident Fund Organisation (EPFO) after mergers and acquisitions.
These provisions are part of over half-a-dozen changes introduced in the simplified standard operating procedures (SOPs) approved by the EPFO central board of trustees recently to strengthen regulatory oversight and improve the ease of doing business for establishments and ease of living for its employees, a senior official told ET.
Under the new system, exempted establishments will not be allowed to declare interest rates more than two percentage points above the annual rate announced by the EPFO.
"This ensures financial prudence and prevents unusually high returns," the official said, noting that certain trusts have been declaring disproportionately high interest rates as high as 34% when residual membership becomes very small.
The EPFO will now audit high-risk or non-compliant establishments while compliant entities may not necessarily be audited each year.
There are 1,000-1,200 large companies, public sector undertakings (PSUs), and private organisations in India holding exempt status under EPFO. They are allowed to manage their own PF trusts under Section 17 of the EPF & MP Act, 1952, but they must provide benefits equal to or better than the standard EPFO scheme.
The new standards operating provisions will be notified soon.
An establishment can cancel the exemption only upon voluntary surrender or pursuant to specific court directions. Such establishments must issue a public notice in newspapers in cases of surrender or cancellation of exemption to safeguard members' interests, ensuring that all member accumulations are credited to their respective accounts and transfer of all inoperative or non-KYC accounts of exempted establishments at the time of cancellation or surrender to prevent misuse or irregular handling.
[The Economic Times]
