The EPFO’s recent Standard Operating Procedure (SOP) for surrendering EPF exemptions provides a comprehensive framework for establishments seeking to cancel their exemptions under Section 17(4) of the EPF Act. Effective from October 30, 2023, this SOP, which supersedes previous instructions, outlines the process for examining and forwarding surrender proposals from field offices to the Head Office. The SOP details the required documentation, such as compliance audits and financial statements, and establishes procedures for handling special cases and monitoring compliance. Responsibilities are clearly defined for establishments, regional offices, zonal offices, and the Head Office, ensuring a standardized and efficient process. The SOP also introduces a mechanism for handling grievances and managing stakeholder feedback, emphasizing adherence to strict timelines and detailed procedural steps for a smooth transition from exempted to non-exempted status.
STANDARD OPERATING ROCEDURE
Surrender of EPF Exemption
EPFO, HEAD OFFICE
MINISTRY OF LABOUR & EMPLOYMENT, GOVERNMENT OF INDIA
14, BHIKAIJI CAMA PLACE, NEW DELHI 110066
www.epfindia.gov.in
No. E-III/10(168)2021/SOP for surrender of exemption/ 612
Date: 3 0 OCT 2023
To
All ACC-HQ (Zones)/ ACC (Zones)
All RPFC-I/RPFC-II/APFC in charge of Field Offices
Subject Standard Operating Procedure (SOP) for Surrender of EPF Exemption – regarding
Madam/Sir,
Please find attached herewith the SOP for Surrender of EPF Exemption. With reference to the statutory provisions contained in Section 17(4) of the EPF Act, the SOP for surrender of EPF Exemption is a special case of Cancellation of Exemption which describes the process through which the proposals for surrender of Exemption are to be examined and forwarded with recommendations by the field offices to Head Office, EPFO. The Head Office examines and obtains recommendation of its committees and the Central Board to communicate for the consideration of the appropriate Government.
This SOP is in supersession of all the previous instructions and circulars issued till date. The list of circulars and instructions to be superseded is annexed herewith as Annexure-1.
The ACC(HQ)/ACC (Zones) to ensure compliance of this SOP in their respective office and in the Regional Offices under jurisdiction.
All RPFC-I/RPFC-LI/APFC in charge of Field Offices are to ensure the compliance in respective offices. In addition, this SOP may be shared to the establishments which have applied for the Surrender of Exemption under their jurisdiction.
(This issues with the approval of Competent Authority)
Yours faithfully
(P Veerabhadra Swamy)
ACC(Exemption)
Enclosed:
1. Approved SOP for Surrender of EPF Exemption.
2. Annexure-I containing all the previous circulars/instructions superseded.
SOP Title: Surrender of EPF Exemption
SOP Number 01
SOP Title: Surrender/Voluntary cancellation of EPF Exemption granted to establishments.
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Page Contents
1. Introduction:
Of late the exempted establishments have been found to be surrendering their exemptions granted under the EPF and MP Act 1952 (Act). The reasons primarily are two-fold; their inability to match the benefits under the EPF Scheme and an increasing confidence of the stakeholders in EPFO’s publicly delivered services.
As per section 17(4) of the Act, any exemption can be cancelled only by the Authority which granted it if an employer fails to comply with the prescribed statutory conditions.
However, nothing prevents the employer from making a request to the appropriate government to cancel its exemption granted under Section 17 of the Act, on a voluntary basis as indicated above. The CBT in its 215th meeting held on 19.12.2016 has delineated the procedure for such situations, as outlined in the departmental Circular dated 27/12/2016.
2. Purpose:
This Standard Operating Procedure (SOP)
a) Standardizes the administrative procedures for surrender of EPF Exemption.
b) Supersedes all extant procedures and circulars from the date of effect of this SOP.
c) Prescribes the documents, the formats, the channel, and timelines for various scenarios of surrender of EPF Exemptions and irons out operational issues.
d) Puts in place a mechanism for monitoring, feedback, and stakeholder management.
3. Scope:
The Draft Standard Operating procedure aims to enable all stakeholders to meet the following objectives:
a) To indicate the manner, mode and format of the surrender proposals and document checklist for the establishments.
b) To standardize the procedures to be followed by EPFO, in a time bound manner.
c) To specify the methods for handling of special cases such as those of closed establishments.
4. Definitions:
For this Standard Operating procedure, unless it is required otherwise,
a) “Act” means Employees’ Provident Fund & Miscellaneous Provisions Act 1952.
b) “Appropriate Government” means, government as defined in Section 2(a) the Act.
c) “BoT” means the Board of Trustees of the exempted establishment constituted as per the provisions in Para 79-C of the Scheme.
d) “Cancellation Date” means the date with effect from which the exemption is cancelled by the appropriate Government.
e) “CBT ” means, Central Board as provided under Section 5A of the Act.
f) “Common Provident Fund Trust” means a Trust with two or more participating establishments with at least one representative each from the participating establishment.
g) “Conditions of Exemption” means conditions contained in Appendix “A” of Para 27AA of the Scheme read with Section 17 (3) of the Act and any additional conditions that may be provided in the notification granting exemption.
h) “Draft agenda” means the designated format for collating information for the purpose of surrender of exemption to be put up to EEC and CBT, in a format circulated by H.O, Exemption Division by the email dated 24th, January, 2023.
i) “EEC” means the Exempted Establishments Committee.
j) “Fund” means the Provident Fund established under a Scheme
k) “RPFC” means, the Regional Provident Fund Commissioner under whose geographical jurisdiction the exempted establishment is covered
k) “PA” means Past accumulations as indicated in section 17(5) of the Act read with Para 28 of the Scheme.
m) “Scheme” means the Employees’ Provident Fund Scheme 1952.
n) “Surrender” means a voluntary request by the establishment for issuance of a formal cancellation order u/s 17(4) of the EPF & MP Act.
o) “Surrender Date” means the date with effect from which the establishment has been directed by RPFC to comply as un-exempted establishment.
p) “Surrender proposal” means, the proposal to be sent by RPFCs through their Zonal Offices preferring the surrender application in specified format in a complete shape through to appropriate Government, for formal cancellation of Exemption under section 17(4) of the EPF & MP Act.
5. Responsibilities:
(a) Establishment:
(i) To decide about the prospective date of surrender well in advance.
(ii) To prepare a complete list of its PF Trust beneficiaries; with and without KYC details as on the date of surrender.
(iii) To get a Third-Party Audit done in consultation with RPFC for funds to be transferred to EPFO on the desired date of surrender
(iv) To transfer the PA dues to the CBT as per the provisions of Section 17(5) read with Para 28 of the Scheme
(iv) To undertake to resolve any grievance pertaining to the period prior to surrender.
(b) Regional Office (RO)-:
(i) To make a basic scrutiny of the application
(ii) To verify the facts of the application on the basis of office records
(iii)To permit compliance as an unexempted establishment
(iv) To prepare the draft agenda with all documents and send to ZO.
(v)To ensure receipt of PA dues and credit in the account of subscribers as per FORM SE-6
(vi) To ensure compliance with Para 28(5) of the Scheme, with a Gazette notification. (vii)To adhere strictly to the timelines indicated in this SOP.
(c) Zonal Office (ZO)-:
(i) To certify the facts in the Draft agenda and send it to HO with recommendations
(ii) To adhere strictly to the timelines indicated in the SOP.
(d) Head Office (HO)-:
(i) To scrutinize the Draft agenda thoroughly for placement before EEC
(ii)To place the EEC approved Draft agenda in the ensuing CBT meeting for ratification
(iii) To communicate to the appropriate Government the views of the CBT
(iv) To follow up with the appropriate Govt as regards formal cancellation notification.
6. Specific Procedure -:
(a) Establishment-:
(i) The establishment shall submit an application in FORM SE-1 addressed to the appropriate Government indicating its intention to surrender the exemption granted to it from a prospective date, to the RPFC both by an email and by registered post. The application may be submitted at least 30 days prior to the date of surrender for scrutiny of the proposal.
(ii) The application shall be compulsorily accompanied with the following documents.
(iii) An undertaking signed by the Employer to recoup any loss against the liability incurred by the Trust, in the process of migration.
(iv) A Copy of the notification of Grant of exemption
(v) A certified copy of the Board resolution from the Board of Trustees of the Trust.
(vi) A copy of the latest Compliance audit observations and their replies.
(vii) Details of the corpus with duly audited balance sheet(s) of the Trust in respect of the principal establishment as well as the participating units along with the details of the securities held under various investment categories.
(viii) The employer shall bear the expenses of any third party audit ordered by the RPFC.
(ix) The Past accumulation along with past accumulation statement shall be forwarded to the Regional office within 30 days of commencement as an un-exempted compliance as per Para 28 of EPF Scheme. Any Past Accumulations received after due date, shall attract the levy of penal damages (u/s 14B of the Act) and interest (u/s 7Q of the Act).
(x) Cash component is to be submitted to the Regional Office in demand draft format until online facility is implemented.
(xi) For SDS, the transferor establishment should approach the deposit Bank under intimation to Regional Office which holds the deposit of their fund by preferring an application for transfer of S.D.S. account in favour of Central Board of Trustees, Employees’ Provident Fund so as to transfer the balance to the State Bank of India, Mumbai where the S.D.S. account of Central Board of Trustees, Employees’ Provident Fund is maintained. The establishment should also furnish the details of deposits made. interest due collected as on the date of cancellation of exemption/coverage to the Regional Provident Fund Commissioner concerned alongwith the S.D.S. pass book.
(xii)The following documents are also required to be furnished by the transferor establishment to the deposit office for onward communication to the Reserve Bank of India. (Public Accounts Department), Mumbai, after completing the necessary formalities by the deposit Office: –
(xiii)Certified copy of order issued by the Regional Provident Fund Commissioner withdrawing the exemption/covering the establishment under the provisions of the Act and for transferring the funds to the Central Board of Trustees, Employees’ Provident Fund.
(xiv) Application and certified copy of resolution passed by the Trustees of the Fund to be transferred for transferring the account to Central Board of Trustees, Employees’ Provident Fund;
(xv) Pass book of the relevant S.D.S. account;
(xvi) Statement of accounts in quadruplicate.
(xvii) Memorandum in FORM SE-7 addressed to SBI, SSB, Mumbai.
(xviii) For transfer of permitted securities, the designated officer of UTI shall be contacted.
(xix) For members not having UAN or necessary details for generation of UAN, details an authenticated statement shall be given by Employer and the credits shall be made only after generation of Aadhar based UAN in collaboration with the Establishment. The Chairman Board of Trustees shall solely remain responsible for the details furnished in the PA statement containing members’ credentials and their EPF balances.
(xx) As regards the surrender of Individual exemption under Section 17(2) read with Para 27 the Establishment / employer may forward the application for surrender of any individual exemption granted under Para 27 directly to the concerned RPFCs. The surrender application shall accompany a certified statement of accounts, UAN, Aadhar, PAN, Bank Account.
(xxi) The certified copy of any compliance Audit/Third party audit observations with respect to the member and their replies along with latest copy of return as prescribed under Para 27(2) of the EPF Scheme should be submitted. A copy of the last balances of the member shall additionally be provided indicating Balances and the interest accrued till the date of surrender.
(b) Regional Office(RO)-:
(i) Applications found incomplete shall be returned back in 7 working days time.
(ii) All surrender proposals within the meaning of para 4 (p) of this SOP shall be treated as a surrender application provided that Legal actions as per the Act & Scheme provisions have been duly initiated in the case of any contravention with the conditions of exemption or any default under the Act and Scheme.
(iii) RPFC may verify point i to xii in FORM SE-1.
(iv) RPFC shall permit liquidation of securities as a precursor to a credit of the PA in terms of the PA statement. Considering the necessity of providing immediate credit to the beneficiaries whose accounts are KYC compliant, RPFC shall allow credit of such accounts using the multiple upload facility, immediately to provide them uninterrupted service. However the liability of the newly inducted members shall be limited to the amount received in their accounts.
(v) RPFC shall cause a Third Party audit of the Trust funds to ascertain the financial health of the Trust fund, whose expenses shall be borne by the employer.
(vi) Subsequent to the aforementioned actions pertaining to scrutiny and verification the RPFC shall allow compliance as an un-exempted unit only after completing the steps from (i) to (v) from the date indicated in the BoT’s resolution. To that effect RPFC shall pass an order in FORM SE-5, permitting compliance as an un-exempted establishment from the prospective date.
(vii) RPFC, APFC/RPFC-II (Compliance) shall approve change of the status of the establishment from exempted to un-exempted in the establishment master to facilitate filing of ECR and remittance of dues subsequent to the orders passed by RPFC-I in FORM SE-5
(viii) Any observation regarding Trust-related deficiencies found in the previous compliance audits may be intimated to the exempted establishment as well as the Board of Trustees for securing compliance before the final proposal is processed.
(ix) Similarly, all cases of evasion of membership and other compliance related deficiencies previously observed by the compliance audit (s) may be forwarded to the internal compliance / recovery section for ensuring compliance that may be required. Such intimations are required to be forwarded within 20 working days from the date of receipt of application of surrender.
(x) After permission is given to comply as an un-exempted establishment, Section 17(5) of the Act read with Para 28 of the Scheme shall come into force with its concomitant penal consequences.
(xi)As regards the cash component of the PA, the Regional offices are required to adopt the following procedure for crediting the demand draft of cash component received from the establishment on immediate priority till online facility is implemented:
(xii)NDC has informed all field offices about the DR functionality released on FO interface link [the URL of Field Office Interface is > https: unifiedportal-epfo.epfindia.gov in FO interface] and field offices have to deposit their collections through VDRs.
(xiii)In this context, VDRs are not to be deposited in the bank accounts maintained at Regional office link branch under the old system.
(xiv)TRRN of the transaction is to be mentioned in the past accumulation column point Xxxiii of FORM S.E.1. This procedure will continue until online facility is implemented.
(xv)For SDS and government securities, the procedure is as follows
(xvi)The DA accounts after taking approval from RPFC-II/ APFC (Accounts) shall email from the official email id of the Regional Office only, the details of the amount so credited against SDS/permissible securities to the Investment Division (Head Office) at email id: [email protected]
(xvii)The Investment Division of Head Office shall confirm the amount of SDS/permissible securities so intimated replying to the email back to the Regional Office within 03 working days.
(xviii)Investment Division shall communicate a REFERENCE NUMBER against which the said amount has been accounted as receipt by CBT.
(xix)Upon receipt of such confirmation from the Investment Division, Head Office, the DA accounts shall enter the details of SDS/permissible securities in the software/FO Interface along with the REFERENCE NUMBER mentioned in the confirmation by the Investment Division.
(xx)The facility to upload a copy of the confirmation as well as the copy of intimation received from the RBI/bank shall be provided in the software by the IS Division.
(xxi)There would be multi-level approval process of such receipt from DA (accounts) to APFC (Cash) to RPFC-II (FA) of the Regional Office concerned based on an OTP verification process.
(xxii)The IS division may provide the facility for multiple uploads as well as the total of the receipt of past accumulations so as to enable ease of reconciliation of the entire past accumulation.
(xxiii) In case a correction is required by the Regional Office in respect of the transfer of the Government Securities (including securities guaranteed by appropriate Government) as per para 28 of the Scheme and credit of the Special Deposit Scheme, a request for such correction may be forwarded to the Investment Division, Head Office through the respective RC-I of the Zonal office duly giving the justification and the documentary evidence.
(xxiv)If the past accumulation is found in order, the Regional office shall ensure the credit of past accumulation into respective UANs within 30 days. Where the UAN’s are not available, the credit may only be made after UAN generation post necessary requirements of UAN generation such as Aadhar are complete.
(xxv))The legal action as may be required shall start separately and shall have no bearing on the establishment in reporting compliance as an un-exempted unit.
(xxvi)An intimation informing the incoming corpus shall be forwarded to the reporting Zonal Office, Banking and Investment wing, and the Exemption Division at the Head Office. This will be done soon after the decision is taken by the RPFC allowing the establishment to report compliance as an un-exempted establishment.
(xxvii)RO shall begin processing of surrender proposal within 30 days’ time from the date of compliance as an un-exempted establishment. Omissions/deficiency, if any, shall be communicated to the employer within the next 7 days by way of e-mail or post. If required, interaction meetings may be conducted with the establishment to resolve any issues related to migration from exempted to un-exempted establishment.
(xxviii)If any compliance audit is pending, the same shall be completed before the final proposal is forwarded to the respective.
(xxix)The compliance audit for the broken period or immediately preceding year shall be completed as soon as the audited balance sheet is finalized, preferably within 60 days of the effective date of surrender of exemption.
(xxx)The resolution of the Board of Trustees signed jointly by the Employees’ and Employers’ representatives shall be deemed to be with the consent of the majority of the employees.
(xxxi)After the receipt of compliance audit report/ Third Party Audit Report, the process for levy of surcharge and actions for any default including assessment of dues, if required, shall be initiated by the RPFC immediately.
(xxxii) The dues shall include any loss to the Trust within the meaning of Rule 6 and Rule 28 of Appendix A of Para 27 AA of the Scheme apart from the shortfall arising out of non transfer or incomplete transfer of PA.
(xxxiii) The RO shall forward the Draft agenda in FORM SE-2 to the Z.O
(xxxiv) Surrender proposal shall not be withheld on ground of non-payment of any dues other than the admitted PA dues as compliance action can be taken even after the cancellation of exemption. Initiation of all due legal action will be sufficient to make the proposal complete.
(xxxv) Subsequent to the receipt of the formal notification of cancellation of exemption RPFC shall proceed for a gazette notification under Para 28(5) of the Scheme declaring that the erstwhile fund of the exempted establishment has been vested with the CBT and the subscribers of such provident fund have now become members of the Fund.
(c) Zonal Office(ZO)-:
(i) The Zonal ACC shall forward the draft agenda sent by RO through a communication in FORM SE-3 in a complete shape, and fit enough to be considered by the Exempted Establishments Committee / CBT, to the Exemption Division, Head Office along with specific recommendations through e-office only.
(ii) All Zonal ACCs shall issue appropriate directions to the field offices under their jurisdiction and insure strict compliance of Head Office directions of depositing their DR collections only in single collection bank account (35896921895-for offline collection maintained at SBI Bhikaji Cama Place. New Delhi- Br. Code 0007755) under the new system.
(iii) The permissible time for processing applications at the Zonal Office is 30 days.
(d) Head Office (HO):-
(i) The draft agenda as received from Zonal ACCs shall be scrutinized at the Exemption Division, Head Office before placing the same for perusal of the Exempted Establishments Committee.
(ii) The Investment Division of Head Office shall confirm the amount of SDS/permissible securities so intimated replying to the email back to the Regional Office within 03 working days.
(iii) For cash component Exemption Division shall verify the TRRN provided by Regional Office in Agenda from EPFO Website.
(iv) The recommendations of the Exempted Establishments Committee shall be placed before the Central Board, in its subsequent meeting.
(v) The complete set of documents, along with the recommendations of the EEC and CBT, shall be sent to the Appropriate Government within 15 days of the receipt of approved minutes of the Central Board.
(vi) The Head office shall follow up on its own and through the Zonal Offices till formal completion of the desired action from the appropriate Governments.
7. Forms and Templates to be used:
1) FORM SE-1: Application format for Surrender of exemption along with list of documents to be submitted by the establishment.
2) FORM SE-2: Checklist and documents to be added/verified and draft agenda by Regional Office.
3) FORM SE-3: Format to be forwarded by the Zonal Office.
4) FORM SE-4: Format for Head Office for sending to the Appropriate Government.
5) FORM SE-5: Order passed by RPFC to comply as an unexempted establishment
6) Form SE-6: Past accumulation statement to be submitted by the exempted establishment.
7) Form SE-7: Memorandum for transfer of Special Deposit Scheme Funds.
8. Matrix of Timelines and Roles and Responsibilities:
a. Timeline for Grant of Permission to start compliance as an Un Exempted establishment:
| T- 0 days(T-0) | T- 0 +7 days (T-1) |
T-2 | T-2 +30 days | T-3 | T-3 + BoT’s date for Surrender |
| Receipt of Application
|
Basic Scrutiny and communication of deficiencies if any | Receipt of Revised Application | Verification of revised application and communication of final discrepancies | Receipt of Application in final shape including justifications for deficiencies if any | Permission to comply as an Un Exempted Unit |
b. Timeline for Agenda preparation for consideration of appropriate Government:
| T- 0 days(T-1) | T-1+ 30 days from the Receipt of PA statement and Transfer of Funds under Para 28 of Scheme (T-2) | T-2 +20 days (T-3) | T-3 +30 days (T-4) | T-4 + 7 days (T-5) | T-5 +30 days (T-6) |
| Date of Compliance as an Un- exempted establishment | AT RO Finalize an agenda fit enough for consideration of EEC. Initiate all Legal action as required | AT ZO Scrutiny of Agenda for discrepancies if any. | AT ZO Receipt of Revised Agenda from RO |
Receipt of Agenda from ZO at HO | 1. Return to ZO for additional /correct information if any Or 2. Present to EEC |
9. Monitoring Mechanism:
a. At HO level: Monthly review by ACC Exemption with all ACCs. Quarterly review by CPFC.
b. At ZO level: Fortnightly review by ACC.
c. At RO level: Fortnightly review by RPFC
d. In addition, a monthly report for monitoring to be sent by ZO (by seeking and consolidating reports from RO) to HO is as under:
Consolidated report in respect of monthly reports:
| Opening Balance*(A)
|
Number of proposals forwarded to Head Office (B)
|
Number of Proposals remanded back from Head office (C) | Closing Balance (A-B+C)#
|
Number of proposals for which Third Party Audit has been conducted. | Number of proposals for which Compliance Audit has been conducted. |
*: For first OB, if no case is under SOP pipeline and no previous surrender proposal already sent to HO is pending for final action i.e. Approval of CBT, the same may be mentioned as numeric zero i.e. ‘0’. Otherwise, first OB should be mentioned as = number of previous cases pending for final action i.e. Approval of CBT + Number of proposals sent as per the SOP.
#: Enclose the list of establishment along with respective code number regarding the closing balance mentioned in table.
10. Modifications/Amendments:
First document. No modification proposed.
11. Internal and External References:
a. Internal References:
The circular referred in this SOP as indicated in Annexure-1
b. External References:
12. Miscellaneous:
(a) Requirement of Third-Party Audit report:
The Third party audit shall be submitted in FORM RM-5* indicated in the SOP on Regulation and management of Exempted Establishments.
*The requisite form is being prepared.
(b) Change History:
| a. Where the SOP is the initial version: | ||
| • | SOP No: 1: | Version 1 |
| • | Effective Date: | Date of issue of SOP. |
| • | Significant Changes: | As and when incorporated. |
| • | Previous SOP no.: | None |
b. Where replacing a previous SOP: None as the present SOP is the First.
- SOP No: Record the SOP and new version number.
- Effective Date: Record effective date of the SOP.
- Significant Changes: Record the main changes from previous SOP.
- Previous SOP no.: Record SOP and previous version number.
| SOP No. | Effective Date | Significant Changes | Previous SOP no. |
