Summary of this article
EPFO EEC approves new SOP for exempted provident fund trusts
The new SOP shifts from physical to online risk-based audits
The CBT to review the SOP recommendations for final approval
The Exempted Establishment Committee (EEC) of the Employees’ Provident Fund Organisation (EPFO) has approved changes in the standard operating procedure (SOP) for exempted establishments. The EPFO had formed a committee last year to review the SOP and recommend changes to streamline processes for exempted entities, making them more transparent and accountable. Recently, the EEC approved the new SOP in a meeting on February 20, 2026 which is to be discussed in the Central Board of Trustees (CBT) for final approval.
The SOP is expected to reduce complexity and enhance ease of doing business for the entities. The proposed changes in the new SOP will be final after CBT approves it in the meeting scheduled on March 2, 2026.
Changes In The New Sop
If the CBT asks for any change in the SOP, it can be updated under the Code on Social Security, 2020, with the approval of the Central Provident Fund Commissioner (CPFC). One of the major changes in the new SOP is a shift from the physical to online audit of the exempted organisation. The objective of introducing online audit, which would be a risk-based audit, is to promote automated auditing and reduce the audit time and compliance burden of these establishments, according to a report by Business Standard.
Exempted Establishments
Exempted establishments are those that manage the provident funds of their employees themselves. They need to take permission from the government to create their own private provident fund trust under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Employers collect the PF from employees’ salaries and manage the corpus, while EPFO remains the regulator, responsible to audit these trusts. The provident fund conditions remain the same, except that the private trust manages the funds instead of EPFO.
The exempted establishments can surrender their exemption if they want to. Notably, in the last few years, the number of establishments surrendering their exemptions has been rising, with 17 establishments surrendering their exemption in 2023-24, compared to 14 in 2022-23, according to the Ministry of Labour and Employment.
The new SOP also introduces audit by third parties, the empanelled chartered accountant firms, with the Comptroller and Auditor General of India (CAG). In case of grievances, the CFPC has the power to resolve issues. Under the new SOP, exempted establishments would have an online portal integrated with the EPFO’s grievance handling system to redress grievances.
According to the existing and the new SOP, exempted establishments have to offer benefits to employees at least equal to what EPFO provides. It can be more, but definitely not less. The new SOP recommends that the balance in the inoperative account in the exempted establishments should be transferred to the EPFO, along with interest.
According to the EPFO website, there were a total of 1,279 exempted establishments as on August 7, 2024.
