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Over six crore active EPF subscribers will be disappointed, as the Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) has decided to recommend an 8.5 per cent rate of interest for FY20. This is 15 basis points (100 basis points is 1 percentage point) lower than the rate of interest for FY19.
The CBT, under the chairmanship of Labour Minister Santosh Kumar Gangwar, met here and, after detailed deliberation, arrived at the revised interest rate. Gangwar confirmed that it was decided to lower the rate keeping in mind the current corpus situation. Had the existing rate of 8.65 per cent been maintained, there would have been a loss to the EPF corpus. However, there will be a surplus of over ₹700 crore in the case of an interest rate of 7.5 per cent and over ₹1,000 crore in the case of 7.45 per cent.
EPF is a post-retirement scheme, where industrial units with a certain number of workers need to contribute a part of their salaries (basic plus dearness allowance) to the corpus. There are two rates of EPF contribution: 12 per cent and 10 per cent. The 12 per cent rate is applicable for all units where the number of employees is more than 20; the 10 per cent applies to units with a lower number of employees. In both the cases, a matching contribution is made by the employer.
Rate notification
Now, post the CBT’s recommendation, the proposal of revised rate will be sent to the Finance Ministry. Once approved there, the rate will be notified. This is expected to take some time. Last year, the CBT made its recommendation in February, but it was notified only in August.
After the Finance Ministry’s concurrence, the Income-Tax Department and the Labour Ministry are required to notify the rate of interest for FY20. Thereafter, the EPFO will give directions to its over 136 field offices to credit the interest into subscribers’ accounts and settle their claims accordingly.
The rate was raised to 8.65 per cent for the previous financial year from 8.55 per cent in FY18. The EPFO had earlier reduced the interest rate for FY17 to 8.65 per cent, against 8.8 per cent for FY16.
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