EPFO proposed the new rate of interest on returns

January 2016, Economy

In Brief:

The Finance and Investment Panel of the Employees’ Provident Fund Organisation (EPFO) board has proposed 8.95 per cent rate of return on retirement savings under its watch for 2015-16. The proposed rate, the highest in five years, may face resistance from the Finance Ministry which is looking to cut interest rates on small savings instruments. At present, EPFO gives 8.75 per cent as the rate of return. This would make investment in EPFO more attractive than most savings alternatives such as General Provident Fund, Public Provident Fund, Special Deposit Scheme and National Savings Certificates which offer lower rate of return.

The central board of trustees of EPFO, chaired by Union Labour Minister, Bandaru Dattatreya, is likely to take a final call on fixing the interest rates in February.
EPF savings are funded by deducting 24 per cent of salary from employees working in firms with 20 or more workers. These contributions, half of which are paid by the employer and half by the employee, are mandatory for employees with a salary of upto Rs.15,000 per month.

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