economy

Finance Ministry gives its nod to 8.5% EPF interest rate for FY21

Finance Ministry gives its nod to 8.5% EPF interest rate for FY21

The finance ministry has approved the Employees’ Provident Fund Organisation (EPFO) proposal to retain 8.5% interest rate for FY21 paving the way for crediting of the interest rate ahead of Diwali bringing cheers to millions of salaried employees. “Finance ministry has given its formal nod to EPFO’s proposal to retain interest rate at 8.5% for the second consecutive year, a government official said under condition of anonymity. This will coincide with government employees and pensioners getting their dearness allowance and dearness relief hike. Last week, the Union Cabinet approved an increase of 3 percentage points on the Dearness Allowance (DA) Dearness Relief (DR) for central government employees and pensioners to 31% effective from 1 July, 2021. In March, the EPFO board recommended 8.5% payout for FY21. EPFO has pegged an income of around ₹70,300 crore in the previous fiscal, including around ₹4,000 crore from selling a portion of its equity investments. The interest rate recommended is a result of combined income from interest received from debt investments and income realized from equity investments, the retirement fund body had said after its central board meeting. The buoyancy in the equity market has helped EPFO get good returns on its equity investments. The 8.5% interest rate compares favourably with other provident funds such as general provident fund (GPF) and savings schemes such as the public provident fund (7.1%) and the national savings certificate (6.8%). The finance ministry has in the past insisted on bringing down EPFO interest rates, but EPFO board has kept interest rates high even while maintaining a small surplus. EPFO has an active subscriber base of more than 60 million and every year it invests 15% of its annual accruals in equity and rest in debt instruments. Download.

economy 2021-10-30 Livemint