Increase in interest rate for PF deposits
ContextRecently, the Centre has accepted the recommendation of the Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) to increase the interest rate of deposits in Provident Fund (PF) to 8.15%.
About the information:
- The new rate will be applicable for financial year 2023-24.
- The CBT had recommended an increase to 15% from 8.10% interest to the deposits on March 28, 2023.
- It is a government-established savings scheme for employees of the organised sector.
- The EPF interest rate is declared every year by the EPFO (Employees Provident Fund Organisation) which is a statutory body under the Employees’ Provident Fund Act, 1956.
- For the current financial year 2022-23, the interest rate on the EPF account has been fixed at 8.15%. Only employees of companies registered under the EPF Act can invest in the EPF or PF.
|Employees’ Provident Fund Organisation (EPFO):
- Both the employer and employee are required to contribute 12% of the employee’s basic salary and dearness allowance every month to the EPF account.
- The Employees’ Provident Fund Organisation (EPFO) is one of the two main social security organization under the Government of India’s Ministry of Labour and Employment and is responsible for regulation and management of provident funds in India, the other being Employees’ State Insurance.
- The interest rate was recommended by the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO).
|EPF vs. PPF:
- EPF is only open to employees of companies that have registered under the EPF Act.
- This means companies with 20 workers or more. It is not available to self-employed or retired individuals.
- The EPF contribution is rigid and fixed at 12% of salary and DA from the employer and employee.
- You cannot contribute less than this amount, although you can contribute more to VPF (Voluntary Provident Fund)
- Withdrawal before 5 years from account opening of EPF is taxable. In the modern economy, many people cannot keep a job in an EPF-registered company for 5 years.
- The EPF rate may not match the long term returns of Mutual Funds or the National Pension System (NPS).