EPFO cheers working class by fixing PF interest rate at 8.5%

presented in February, announced that interest on employee contributions to provident fund in excess of ₹2.5 lakh per annum would be taxed, starting April 1. She said that the tax-exempted deposit limit was set at ₹2.5 lakh.

In March last year, the retirement fund manager disappointed subscribers with a downward revision of interest rates on PF deposits to 8.5% , a seven-year low.

“Earnings of the EPFO are facing different situations in the financial markets. EPFO’S earnings for 2020-21 are pegged at ₹65,000 crore and it will be comfortably able to pay 8.5% this year too,” Upadhyay said.

The Covid pandemic has put pressure on EPFO’S earnings and delayed payments for 2019-20. This was paid in two instalments, deriving from two sources of the EPFO’S investments: 8.15% from debt investments and 0.35% from the equity portfolio.

Pressured earnings have forced the retirement fund manager to revise down the interest rates payable to depositors in some preceding years. For instance, during 2017-18, the organisation paid an 8.55% interest rate. In 2016-17, the interest rate was higher at 8.65%.

According to the labour ministry’s latest statement of payroll data, net new subscribers of the EPFO, which also gives an estimate of formal-sector employment growth, rose by 24% to 1.25 million in December 2020 compared to a year ago.

Previously, interest accrued from employee’s provident fund (EPF) was exempt from tax. “The decision of the Union budget to fix the tax-exempt limit on EPFO deposits from the employee’s share and impose a tax above deposits of ₹2.5 lakh is aimed more at curbing disproportionately high voluntary savings by highincome individuals,” said Bikram Dhamija, a partner at Compass Tax PLC.

The CBT also approved creation of 98 posts in different cadres required for seamless functioning of regional offices of Jammu & Kashmir and paving the way for smooth absorption of all staff and officers of J&K EPFO into EPFO governed by the CBT.

The decision not to lower interest rates is a welcome move for 50 million active EPFO subscribers, for whom PF is often the only mode to save up