The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO), in its meeting held on February 28, 2025, recommended that the current annual interest rate of 8.25% on provident fund deposits be retained for the financial year 2024-25. Despite demands from trade union representatives for a higher rate, the government decided to maintain the existing rate, citing economic considerations.
Interest Rate Retained at 8.25%
During the meeting, chaired by Union Labour Minister Mansukh Mandaviya, the proposal to increase the interest rate was raised by trade union representatives. However, the government opted to retain the existing 8.25% rate, stating that it was a stable and competitive return compared to other fixed-income investment options.
Following official notification by the Government of India, EPFO will credit the interest rate into subscribers’ accounts. The Union Labour Ministry emphasized that the EPF remains an attractive investment for salaried individuals due to its tax-free status (up to a specified limit) and stable returns.
Trade Unions Demand Interest Rate Hike
Trade union representatives, particularly R. Karumalaiyan, a member of the Centre of Trade Unions (CITU), demanded that the interest rate be increased to at least 8.5%, citing the impact of price rise and the overall economic conditions affecting workers.
However, Minister Mandaviya reasoned that an increase in the interest rate was not feasible at this moment. He pointed out that the Reserve Bank of India (RBI) had recently reduced the repo rate as part of measures to control inflation. He suggested that the CBT wait for these measures to show results before considering an increase.
Comparison with Other Investment Options
The Union Labour Ministry highlighted that, despite the rate being unchanged, EPF offers relatively high and stable returns compared to many other fixed-income instruments. The tax-free interest component makes it a highly attractive option for long-term savings. This move reflects strong confidence in the credit profile of EPFO’s investments and the organization’s ability to deliver competitive returns to its members.
Discussion on Pension and Employee Contributions
Apart from the interest rate decision, the CBT also discussed two major demands from trade unions:
- Increasing the minimum pension amount
- Raising the contribution slab for the Employees’ Pension Scheme (EPS)
The board has asked EPFO to prepare a detailed report on these issues, which will be discussed in a future meeting.
Higher Pension Processing Update
The CBT was briefed on the status of higher pension applications, revealing that 72% of the applications have been processed so far. This indicates significant progress in addressing pension-related concerns raised by employees and pensioners.
Key Modifications to the Employees’ Deposit Linked Insurance (EDLI) Scheme
The CBT also approved several important modifications to the Employees’ Deposit Linked Insurance (EDLI) scheme to enhance benefits for EPF members and their families:
1. Minimum Life Insurance Benefit
A minimum life insurance benefit of ₹50,000 will now be provided to EPF members who pass away without completing one year of continuous service. This amendment is expected to provide relief in more than 5,000 cases annually where employees die in service.
2. EDLI Benefit for Employees Who Die Within Six Months of Last Contribution
If an EPF member passes away within six months of their last contribution being received, the EDLI benefit will still be applicable—provided the member’s name is not officially struck off the company rolls. This change is projected to benefit over 14,000 families every year.
3. Relaxation in Employment Continuity Norms
Under the new rule, a gap of up to two months between two spells of employment will now be considered as continuous service. This ensures that employees who frequently shift jobs remain eligible for a higher quantum of EDLI benefits. The modification is expected to benefit more than 1,000 cases of deaths in service annually.
Summary of the News
| Category | Details |
|---|---|
| Why in News? | The Central Board of Trustees (CBT) of EPFO decided to retain the 8.25% interest rate on provident fund deposits for FY 2024-25 during a meeting on February 28, 2025. |
| Interest Rate Decision | – Interest rate retained at 8.25%, despite trade union demands for a hike. – Reason: Government cited economic considerations and stable returns. |
| Trade Union Demand | – Trade union representatives (CITU’s R. Karumalaiyan) demanded 8.5% interest rate citing rising prices and economic challenges. – Government declined the request, mentioning RBI’s recent repo rate cut and the need for stability. |
| Comparison with Other Investments | – EPF remains competitive compared to fixed-income instruments. – Tax-free interest (up to a limit) makes it an attractive savings option. |
| Other Discussions | – Increase in minimum pension amount proposed. – Raising contribution slab for Employees’ Pension Scheme (EPS). – EPFO to submit a detailed report on these demands for future discussion. |
| Higher Pension Processing | – 72% of higher pension applications processed. |
| Key EDLI Scheme Modifications | 1. Minimum Life Insurance Benefit: ₹50,000 for EPF members dying within one year of service. 2. EDLI Benefit Eligibility: Employees dying within 6 months of last contribution remain eligible. 3. Employment Continuity Norms: 2-month job gap now considered continuous service for EDLI benefits. |
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