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Refuting Finance Ministry’s claim, Labour Ministry has justified EPFO’s declaring 9.5 per cent interest for 2010-11, saying the surplus of Rs 1,731.57 crore with the provident fund manager is real and not an accounting flaw.
The Finance Ministry had questioned the increase in the rate of interest to 9.5 per cent on PF deposits for the current fiscal, stating the EPFO had no real surplus.
It said the surplus shown by the EPFO arose because all subscribers’ accounts were not updated.
The Finance Ministry has notified income tax exemption only up to 8.5 per cent interest, which the Employees’ Provident Fund Organisation (EPFO) has been giving since 2005-06 on this rate of return.
In a recent letter of January 29, the Labour Ministry has 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 Comptroller and Auditor General (CAG) report which suggested that there was no surplus with the EFFO’s interest suspense account.
CAG argued that Rs 1,731 crore was shown as extra amount because of not updating 4.72 crore members’ accounts.
In its counter-argument, the Labour Ministry said that the EPFO has kept a provision for the extra payment of interest — irrespective of whether accounts are updated or not.
Employees’ Provident Fund Organisation’s apex decision making body Central Board of Trustees (CBT) headed by the Labour Minister had announced 9.5 per cent rate of return after it found a surplus of Rs 1731.57 crore in its Interest Suspense Account.
Finance Ministry has to give concurrence to the rate of return decided by CBT and notify allowing tax exemption on entire such earnings on PF deposits.
Finance Ministry had also claimed that EPFO’s income is taken on ‘actual receipt basis’ while the liability was taken on ‘accrual basis on some assumptions’
Dismissing this, Labour Ministry said the income and liability both have been taken on actual receipt (corpus) of the EPFO based on balance sheets of past since 1952-53.
The ministry said that since the calculation has been done at macro level on the total credits of all the individual accounts, it does not make any difference whether the accounts are actually updated or not.
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