The Employees’ Provident Fund Organisation (EPFO) has maintained 8.5 per cent interest for 2020-21, the same rate fixed for the last fiscal 2019-20.
The decision was taken at the Central Board of Trustees (CBT) meeting, which is the main decision-making body of EPFO.
The announcement comes on the back of large withdrawals and fewer contributions through last year amid the coronavirus pandemic.
When the lockdown due to the coronavirus outbreak was imposed in March, the EPFO had allowed the subscribers to make a partial withdrawal, or ‘advance’ withdrawal of up to 75 percent of balance or three months’ wages, whichever is lower, as non-refundable advance from their PF corpus.
As per reports, the retirement fund body settled 56.79 lakh COVID-19 non-refundable advance claims and disbursed Rs 14,310 crore till December 31, 2020.
Last year, in March, EPFO had lowered the interest rate on provident fund deposits to a seven-year low of 8.5 percent for 2019-20, from 8.65 percent in 2018-19. The EPF interest rate provided for 2019-20 was the lowest since 2012-13 when it was 8.5 percent.
The EPFO had provided an 8.65 percent interest rate to its subscribers for 2016-17, and 8.55 percent in 2017-18. The rate of interest was slightly higher at 8.8 percent in 2015-16.
Budget 2021 has proposed to restrict tax exemption for interest income earned on employees’ contribution to various provident funds to the annual contribution of Rs 2.5 lakh from April 1, 2021. This simply means that interest earned on the annual EPF above Rs 2.5 lakh will be taxable.
As per the payroll data for the month of December 2020 issued by the EPFO, the net new enrollments rose by 24 percent to 12.54 lakh year-on-year.
Speculations about lower interest on provident fund deposits due to the economic downfall in the last year owing to the pandemic had been making the rounds. The retirement body had said that the 8.5 percent interest would be paid in two installments – 8.15 percent from debt investments and 0.35 percent from equity.
EPFO invests in Exchange Traded Funds (ETFs) based on Nifty 50, Sensex, Central Public Sector Enterprises (CPSEs) and Bharat 22 Indices. The EPFO does not invest in shares and equities of individual companies, Santosh Kumar Gangwar, Union Minister of State for Labour and Employment, had said in written reply to a question in Lok Sabha in December 2019.
Meanwhile, the Indian benchmark indices pared some of their early losses but were still trading over half a per cent lower in Thursday’s noon deals. The S&P BSE Sensex traded around 51,000 levels, down 500 points. The index had earlier tumbled to as low as 50,540. The Nifty50 was below the 15,150-mark.