The 8.15% interest rate that the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) had suggested for its more than 6 crore subscribers for the financial year 2022–2023 was approved by the government on Monday. The central government has given its approval for the EPF interest rate to be credited into members’ accounts, according to a circular released today by the EPFO.
As per custom, the Ministry of Labour and Employment forwarded the Ministry of Finance’s advice regarding the interest rate for approval. Following the government’s approval of the interest rate, the EPFO will now begin crediting the previous fiscal to EPF subscribers.
“The Ministry of Labour and Employment, Government of India, has conveyed the approval of the Central Government under para 60(1) of Employees’ Provident Fund Scheme, 1952 to credit interest @ 8.15% for the year 2022-23 to the account of each member of the EPF Scheme as per the provisions under Para 60 of EPF Scheme, 1952,” the EPFO circular said.
This was one of the EPF interest rate approvals that the Finance Ministry gave in the shortest amount of time. On June 3, last year, the central government authorised the interest rate for 2021–2022. The period of time between the approval and the ultimate crediting of the interest to member accounts would be essential, though. Despite an early nod in June, many EPF users last year complained about the delay in crediting the interest rate. The Finance Ministry then confirmed in October that there is no interest rate reduction for EPFO subscribers and that the reason for the delay in the crediting of the interest rate for FY22 is the software upgrade required for the past year’s tax reforms.
When an 8.1% interest rate for the year was recommended in March 2022, the EPFO recorded a deficit of about Rs 197 crore in 2021–22 against a projected surplus of Rs 350–400 crore for the year. The Finance Ministry approved an 8.1% rate for 2021–22, which was the lowest in four decades.
The Fund’s balance fell to a deficit in the year 2021–2022 principally as a result of several exempted businesses approaching the EPFO about giving up their exempt status. A total of 83 cases were received for giving up exempt status, and the CBT was presented with five of those cases for review.
Over time, the finance ministry has questioned EPFO’s retention of such a high rate and has encouraged it to lower it to a level below 8%. When compared to other savings products, the EPFO rate is still among the highest, with small savings rates ranging from 4.0% to 8.2%.
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