The Employees' Provident Fund Organisation (EPFO) announced the interest rates on Provident Fund deposits for the financial year 2020-21 on March 4. The EPFO board has recommended 8.5 percent interest for the financial year 2020-21, same as 2019-20.
Speculations about lower interest on provident fund deposits due to the economic downfall and coronavirus pandemic were making the rounds. However, the rate has been kept unchanged.
The decision was taken at the 228th meeting of the Central Board of Trustees, held in Srinagar under the chairmanship of Santosh Kumar Gangwar, Union Minister of State for Labour and Employment.
"The Central Board recommended 8.50% annual rate of interest to be credited on EPF accumulations in members’ accounts for the financial year 2020-21. The interest rate would be officially notified in the government gazette following which EPFO would credit the rate of interest into the subscribers’ accounts," the board said in a statement.
"People must appreciate that the government has maintained the rate of interest for 2020-21 despite a huge economic downturn due to COVID-19," Virjesh Upadhyay, EPFO Board Member and General Secretary of Bharatiya Mazdoor Sangh told Moneycontrol.
Last year, in March, EPFO had reduced the interest rate on provident fund deposits to a seven-year low of 8.5 percent for 2019-20.
For the financial year 2018-19, the interest rate was fixed at 8.65 percent. The EPFO had provided an 8.55 percent interest rate to its subscribers for 2017-18 and an interest rate was 8.65 percent for the financial year 2016-17.
"In order to rationalise tax exemption for the income earned by high-income employees, it is proposed to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of Rs 2.5 lakh. This restriction shall be applicable only for the contribution made on or after 01.04.2021," Sitharaman said in the budget speech.According to K E Raghunathan, CBT Member representing employers, the organisation had an income of Rs 70,500 crore for distribution. He further noted the EPFO will be left with a surplus of Rs 300 crore after crediting an interest rate of 8.5 percent for FY21.