Economy

Fin Min to soon ratify 9.5% interest rate on PF deposits

| | Updated on: Feb 15, 2011

The Finance Minister will soon give green signal to the payment of 9.5 per cent interest rate on provident fund deposits during 2010-11.

“...We can get ratification on 9.5 per cent for the fiscal from the Finance Ministry any moment before March 31, 2011,” the Labour Secretary, Mr P.C. Chaturvedi, said.

He was speaking to reporters ahead of the Central Board of Trustees (CBT) meeting. CBT is the highest policy making body of the Employees’ Provident Fund Organisation (EPFO).

Although CBT, which is headed by the Labour Minister, had decided to give a higher return of 9.5 per cent on provident fund deposits for 2010-11, the Finance Ministry had expressed its reservation on the move.

Downplaying the ongoing tussle between the two ministries over hiking the interest rates on PF deposits, Mr Chaturvedi said: “these are just consultations between the two ministries’’.

The views of the Finance Ministry over the payment of interest rates will be placed before the CBT, he said, pointing out that the decision of the trustees had always been accepted by the Government in the past.

In case the row remains unresolved, EPFO sources said, the issue would be taken up by the two Ministries informally with the Prime Minister, Dr Manmohan Singh.

Following the discovery of Rs 1,731.57 crore in suspense account, the CBT raised the rate of interest on provident fund deposits to 9.5 per cent for its 4.71 crore subscribers from 8.5 per cent which is being paid by EPFO since 2005-06.

The decision, however, did not find favour with the Finance Ministry which argued that there was no real surplus. It said the surplus shown by the EPFO arose because all subscribers’ accounts were not updated.

In a recent letter of January 29, the Labour Ministry argued the EPFO is not asking for any Government support for the extra returns to the salaried workers. It is their money which has earned returns.

The Finance Ministry’s objections were based on a report by the Comptroller and Auditor General which suggested that there was no surplus with EPFO’s interest suspense account.

The Finance Ministry has to give concurrence to the rate of return decided by the CBT and notify allowing tax exemption on entire such earnings on PF deposits.

Published on February 15, 2011

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