This guide provides a simplified overview of the rules and practical requirements relating to Provident Funds for private sector establishments in Bangladesh. It covers the relevant provisions of the Bangladesh Labor Act, 2006, the Bangladesh Labor Rules, 2015, the Income Tax Act, 2023, and the Income Tax Rules, 1984.

A Provident Fund (PF) is a long-term savings scheme jointly funded by an employee and their employer throughout the period of employment. Each month, both parties contribute a defined percentage of the employee's basic salary into a dedicated fund account. When the employee retires, resigns, or otherwise leaves the organization, the accumulated amount, including returns on investment, is paid out to them.

For employees, a PF provides financial security at the end of their working life. For employers, it is both a legal obligation in certain circumstances and a practical tool for workforce retention.

Who Does This Apply To?

This guide covers private sector establishments in Bangladesh. The rules described here are drawn from the Bangladesh Labor Act, 2006 and the Bangladesh Labor Rules, 2015. Separate rules apply to tea-garden establishments and newspaper organizations, which are not addressed here.

Step 3: Forming the Board of Trustees

Immediately after the fund is established, a Board of Trustees must be formed to govern and manage it. The structure of the Board is as follows:

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• The Board must have an equal number of employer representatives and worker representatives.
• The total number of trustees must not exceed 07.
• The Government nominates the Chairman of the Board.

Who Represents the Workers?

• If the establishment has a Collective Bargaining Agent (CBA), the CBA nominates the worker representatives.
• If there is no CBA, the Participation Committee nominates them.
• If neither a CBA nor a Participation Committee exists, the workers elect their own representatives under the supervision of the establishment's Welfare Officer.

Each trustee serves for a term of two years. Employer representatives are typically nominated from the accounts department.

Step 4: Enrolling Eligible Workers

Not every worker joins the PF immediately. Eligibility is subject to the following conditions:

• The worker must hold permanent employment status.
• The worker must have completed at least one year of continuous service.
• Owners, partners, and members of the management board are not eligible.

Enrolment Process

• Within 15 days of a worker becoming eligible, the employer must submit that worker's details and nominee information to the Board of Trustees using Form-67, as prescribed under the Bangladesh Labor Rules, 2015.
• The employer must also direct the eligible worker to fill in a nomination form (Form-41) and provide photographs within 10 working days of becoming eligible.
• This nomination information must then be forwarded by the employer to the Trustees within the following 5 working days.

Step 5: Issuing Provident Fund Account Numbers

Once a worker is enrolled, the Board of Trustees will assign them a unique Provident Fund account number using Form-68, as prescribed under the Bangladesh Labor Rules, 2015. The account number is communicated to both the worker and the employer and serves as the reference for all future transactions.

Step 6: Monthly Contributions

The heart of the Provident Fund is the regular monthly contribution made by both the employee and the employer. Under the Labor Rules, 2015, the monthly contribution rate must be between 7% and 8% of basic salary, unless the Fund's own rules specify otherwise. In general, the market practice is 10% of the basic salary.

How Contributions Work — At a Glance

Note: Both amounts are deposited into the PF bank account jointly. The employer is responsible for deducting the worker's contribution from their salaries/wages and depositing both amounts (worker's share and employer's share) into the fund's designated bank account within 15 days of the end of the relevant month.

Late deposit creates liability for the employer. The fund must maintain its designated account with a scheduled bank.

Step 7: Managing and Investing the Fund

The Board of Trustees is responsible for the day-to-day management of the fund. Key requirements include:

• A dedicated bank account titled 'Provident Fund Account' must be opened with a scheduled bank.
• Withdrawals from this account require joint signatures as determined by the Board, typically the Chairman plus one other authorized trustee.
• At least 50% of the total accumulated fund must be invested in government securities, such as debentures, stock of the Government or Government-backed companies, Bangladesh Sanchaypatra, or other approved investment avenues, including immovable property.

Step 8: Record-Keeping, Audit, and Annual Reporting

Both the employer and the Board of Trustees must maintain complete and accurate financial records covering all contributions, investment earnings, advances, and other transactions. Specific obligations include:

• Each member must receive an annual statement showing the current status of their individual PF account.
• The fund's accounts must be audited annually by a recognized Chartered Accountant firm. The cost of the audit as well as other legal, stationery, and administrative expenses are borne by the employer.
• The Board of Trustees must submit an annual report, together with the audited financial statements, to the employer in Form 81(k) by 30 March of the following year.
• The Board must also prepare an annual summary of the fund's assets in Form 69 and a balance sheet, and attach copies of both documents to the annual report.
• The employer must forward a copy of this report and the audited accounts to the Department of Inspection for Factories and Establishments (DIFE).

Obtaining Recognition from the NBR

Once the Provident Fund is operational under the Bangladesh Labor Act, 2006, the employer may apply to the National Board of Revenue (NBR) for recognition of the fund. This recognition is entirely separate from the requirement to establish the fund and is pursued specifically to unlock tax advantages for both the employer and the employees.

Why Seek NBR Recognition?

• The employer's contributions to a recognized fund may qualify as a deductible business expense.
• Investment income and gains earned by a recognized fund may be exempt from income tax, resulting in a higher return for the employees.
• Employees may be entitled to claim investment tax rebate on both employer's and employee's contributions.
• Employee receipts from a recognized fund may be exempt from personal income tax.
• A recognized provident fund may invest into Bangladesh Sanchaypatra, having a significantly higher risk-free rate of return in the current market context.

Conditions That Must Be Satisfied

How to Apply for NBR Recognition

Application: The employer submits a formal application to the Commissioner of Taxes in the manner prescribed by the NBR.

Review: The Commissioner reviews the application and may request additional documents from the trustees.

Decision Timeline: The Commissioner must issue a decision within 60 days of receiving the application. If no decision is communicated within that period, the fund is treated as approved by default. The minimum tenure of the recognition must be for 10 years.

Approval Order: If approved, the order will specify the conditions, the effective date, and the duration of recognition.

Renewal: If the recognition is granted for a fixed period, with a minimum tenure of 10 years, the employer must apply for renewal before the approval lapses.

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Disclaimer

This document is prepared by ACE Advisory for general reference purposes only. It provides a simplified overview of the legal framework and should not be relied upon as formal legal or tax advice. Readers are encouraged to consult ACE Advisory or a qualified professional before taking any specific course of action.