The government has approved a four-decade-low interest rate of 8.1 per cent on employee provident fund deposits for 2021-22, according to news agency PTI quoting an EPFO office order. The decision will impact about five crore subscribers of the Employees’ Provident Fund Organisation (EPFO).
The retirement fund body had in March decided to pay an 8.1 per cent rate of interest on the provident fund deposits for the financial year 2021-22, against 8.5 per cent earlier. The 8.1 per cent EPF interest rate is the lowest since 1977-78, when it stood at 8 per cent.
The Ministry of Labour and Employment has conveyed the approval of the central government to credit 8.1 per cent rate of interest for 2021-22 to each member of the EPF scheme, according to the PTI report quoting the EPFO office order issued on Friday. The labour ministry had sent the proposal to the Ministry of Finance for its concurrence.
The 8.5 per cent interest rate on EPF deposits for 2020-21 was decided by the Central Board of Trustees (CBT) in March 2021. The CBT is a tripartite body of the EPFO involving government, workers and employers’ representatives and the decision of CBT is binding on EPFO. It is headed by the labour minister.
It was ratified by the finance ministry in October 2021. Thereafter, the EPFO issued directions to field offices to credit the interest income at 8.5 per cent for 2020-21 into the subscribers’ account.
An EPFO trustee, K E Raghunathan, who represents employers, said the speed with which the ministries of labour and finance have cleared the interest rate is really appreciable, considering the dire need of funds in the hands of employees and it will help them meet expenses such as educational needs of their children. In March 2020, the EPFO had lowered the interest rate on provident fund deposits to a seven-year low of 8.5 per cent for 2019-20, from 8.65 per cent in 2018-19, according to the PTI report.
The EPF interest rate provided for 2019-20 was the lowest since 2012-13, when it was brought down to 8.5 per cent. EPFO had provided 8.65 per cent interest rate to its subscribers in 2016-17 and 8.55 per cent in 2017-18.
The rate of interest was slightly higher at 8.8 per cent in 2015-16. It had given 8.75 per cent rate of interest in 2013-14 as well as 2014-15, higher than the 8.5 per cent for 2012-13. The rate of interest was 8.25 per cent in 2011-12.
What is EPF?
EPF is a mandatory savings scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. It is managed under the aegis of Employees’ Provident Fund Organisation (EPFO). It covers every establishment in which 20 or more persons are employed. The employee has to pay a certain contribution towards the provident fund and the same amount is paid by the employer on a monthly basis.
At the end of retirement or during the service (under some circumstances), the employee gets the lump sum amount including the interest on PF contributed which gets accrued. Nearly 4.9 crore new subscribers joined Employees’ Provident Fund (EPF) scheme during September 2017 to November 2021 period, government data showed.
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