Festival cheer for EPFO subscribers: FinMin approves 8.5% interest for FY21

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The finance ministry has approved an interest rate of 8.5% on provident fund deposits for 2020-21, according to a media report. The (EPFO) will credit the interest amount to almost 60 million beneficiary accounts once the approval is officially communicated to the fund body.

The Employees’ Provident Fund Organisation’s (EPFO) Central Board of Trustees had earlier approved the interest rate and sought approval of the Finance Ministry for 8.5% interest for FY21. After the board’s approval, the labour ministry has notified it. The labour minister heads the board of trustees.

The move that comes days ahead of Diwali will cheer up the salaried class, especially those who are struggling with job losses and pay cuts. The Economic Times in a report quoted Labour secretary Sunil Barthwal as saying that the finance ministry has given its clearance and it will be communicated as quickly as possible.

The 8.5% interest rate would mean EPFO will have a surplus of Rs 300 crore as against a surplus of Rs 1,000 crore in the previous financial year. The interest rate is the same as the previous year.

EPFO

The newspaper report said the finance ministry has over the years questioned EPFO’s higher rate of interest compared to other government schemes such as the public provident fund or small savings schemes has been substantially lower.

EPFO had reported an income of roughly Rs 70,300 crore in the previous fiscal, with around Rs 4,000 crore coming from the sale of a portion of its stock investments and Rs 65,000 crore coming from debt, says the report, adding that the board of trustees recommended 8.5% for FY21 based on this.