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Tuesday 15 June 2021
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EPFO hikes interest rate on PF

 

Retirement fund body EPFO has announced an interest rate of 8.65 per cent on PF deposits for 2018-19. The rate of interest was 8.55 per cent for the FY 2017-18. The Employees’ Provident Fund Organisation manages its flagship scheme, Employees Provident Fund,  as per the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

Unlike the interest rates of small savings investments such as PPF and NSC, where the rate of interest is linked to the G-sec yields, the EPF interest rate is fixed by the government based on the income it generates, which is primarily through government securities. The EPFO had started investing in equities through Exchange Traded Funds in August 2016. At present it invests 15 per cent of its Rs.1.5 crore investible deposits at hand every year in ETFs.

Administered by the Ministry of Labour and Employment, every year the Central Board of Trustees recommends the interest rate which the finance ministry finally ratifies. Generally, whatever is earned is distributed to employees, although any surplus is retained for future distribution.

As per the Employees’ Provident Fund Scheme, 1952 rules, “Interest shall be credited to the member’s account on monthly running balances basis with effect from the last day in each year.” Accordingly, the interest will get credited to the member’s account.

 

 

The EPFO had provided a five-year low rate of interest of 8.55 per cent to its subscribers for 2017-18. The body had kept the interest rate at 8.65 per cent in 2016-17 and 8.8 per cent in 2015-16. It provided 8.75 per cent interest for 2013-14 as well as 2014-15. The rate of interest was 8.5 per cent in 2012-13.

Currently, the interest rate on PPF stands at 8 percent per annum. For both PPF and EPF, the earnings are tax free. While the former is available for both salaried and non-salaried, the latter is a retirement focused investment only for the salaried individuals.

 

 

 

 




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