The central board of trustees at Employees Provident Fund Organisation (EPFO) has recommended 8.5 per cent interest for subscribers during 2020-21, the government has said. The interest rate would be officially notified in the government gazette following which EPFO would credit the rate of interest into the subscribers’ accounts, according to a statement issued by the Ministry of Labour and Employment.
The decision was taken at the 228th meeting of the central board held in Srinagar under the chairmanship of Union Minister of State for Labour and Employment (Independent Charge) Santosh Kumar Gangwar, Vice-Chairmanship of Shri Apurva Chandra, Secretary(L&E) and the Member Secretary Shri Sunil Barthwal, Central PF Commissioner.
“Since FY14, EPFO has consistently generated returns of over 8.5 per cent. A high EPF interest rate along with compounding makes a significant difference to gains of subscribers,” said the statement.
“This is despite the fact that EPFO has consistently followed a conservative approach towards investment, putting the highest emphasis on the safety and preservation of principal first approach. The risk appetite of EPFO is very low since it involves investing poor man’s retirement savings also.”
EPFO over the years has been able to distribute higher income to its members, through various economic cycles with minimal credit risk. Considering the high credit profile of the EPFO investment, the interest rate of EPFO is considerably higher than other comparable investments avenues available for subscribers.
During the period from 2015-16 EPFO prudently started investing in equity through exchange-traded funds based on the NSE 50 and BSE 30 indices.
The assured fixed return approach of EPFO, announced by CBT every year along with the tax exemptions makes it an attractive choice for investors, providing them with strong social security in the form of provident fund, pension and insurance schemes.
In March last year, EPFO had lowered the interest rates on provident fund deposits to 8.5 per cent for 2019-20. In Budget 2021, Finance Minister Nirmala Sitharaman had announced that provident fund subscribers who invest more than Rs 2.5 lakh in their provident fund accounts in a year will not be able to earn the mandated 8.5 per cent tax-free return from next month. Interest earned on an amount exceeding Rs 2.5 lakh will be taxable as per the budget announcements for the next financial year, which starts from April 1.