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Budget 2021

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Moneycontrol

Budget 2021

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Govt sticks to 8.5% as EPF interest rate for FY20; Redeems ETF units up to Dec 31 2020 instead of March 31 2020 to meet the 8.5% commitment

Gains from ETF sales stood at around Rs 3,000 crore which helped the government meet FY20 EPF rate of 8.5 percent. The 8.5% interest would comprise 8.15% from debt income and balance 0.35% (capital gain) from the sale of ETFs (exchange traded funds) subject to their redemption by 31st December, 2020.

December 31, 2020 / 06:47 PM IST
EPFO | Representative Image

EPFO | Representative Image

The Prime Minister Narendra Modi-led government on December 31 decided to stick to 8.5 percent Employees' Provident Fund (EPF) interest rate for FY20. This will benefit around 6 crore EPF subscribers who will experience the credit of 8.5 percent rate of interest in their accounts.

The gains from exchange-traded fund (ETF) holdings were higher than expected at around Rs 3,000 crore which helped meet FY20 EPF rate of 8.5 percent, reported CNBC-TV-18.

EPFO may credit full 8.5% interest for FY20: How to check balance

"We had said that it would be our endeavour to provide 8.5 per cent rate of interest on EPF for 2019-20. We have issued a notification to provide 8.5 per cent rate of interest on EPF for 2019-20. We have also began the process to credit the said rate of interest into subscribers account," Union Labour Minister Santosh Gangwar said on Thursday.

The Union Minister also said that he has asked to ensure that all those members who are retiring on December 31, must get 8.5 per cent rate of interest (for 2019-20). Adding more, Gangwar said that the process for capital gains for payment of 0.35 per cent interest for 2019-20 has also been completed.

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"It (8.5 per cent interest) would comprise 8.15 per cent from debt income and balance 0.35 per cent (capital gain) from the sale of ETFs (exchange traded funds) subject to their redemption by 31st December, 2020," he said.

Earlier reports arrived that the Union Finance Ministry may give nod to EPFO for interest rate recommendation of 8.5 percent for FY20. Also, the prospects of retirement fund body (EPFO) crediting the interest rate in one go of 8.5 percent instead of splits, is higher.

In March 2020, the apex decision-making body under the labour minister Santosh Gangwar -- EPFO’s Central Board of Trustees -- approved 8.5 percent interest rate on EPF for 2019-20. The amount was to be credited in the account of around 6 crore EPF subscribers by September, 2020.

However, the EPFO proposed to credit the amount in two tranches -- 8.15 percent and 0.35 percent, citing the COVID-19 pandemic. Combinedly, the 8.5 percent EPF is 15-basis points lower than 8.65 percent announced for 2018-19.

The retirement fund body in its previous plan had thought to liquidate some of its investment in ETFs to provide 8.5 percent interest for the last fiscal. However, choppy market conditions amid the lockdown restricted it to do so.

Following the payment of interest rate of 8.5 percent, the EPFO will be left with surplus of Rs 700 crore as per an estimate of its Finance Investment and Audit Committee.
Moneycontrol News
first published: Dec 31, 2020 04:37 pm

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