Govt Approves 8.15% Interest Rate on Employees Provident Fund Deposits for 2022-23
Govt Approves 8.15% Interest Rate on Employees Provident Fund Deposits for 2022-23
The Union government has approved an increased interest rate of 8.15% on Employees Provident Fund (EPF) deposits for the financial year 2022-23. This decision comes after the EPFO trustees ratified the proposal to raise the interest rates, which had been at a four-decade low of 8.10% for the previous fiscal year. The higher interest rate will benefit over six crore EPF subscribers and is expected to be credited to their accounts soon.
Background of the EPF Interest Rates
In March 2022, the Employees Provident Fund Organisation (EPFO) reduced the interest rate to a four-decade low of 8.10% for FY 2021-22 from the previous rate of 8.5% in FY 2020-21.
The EPF interest rate had not been as low as 8.10% since 1977-78 when it stood at 8%.
Approval of Increased Interest Rate
Govt Approves 8.15% Interest Rate on Employees Provident Fund Deposits for 2022-23
On March 28, 2023, the EPFO decided to increase the interest rates for the financial year 2022-23 to 8.15%, subject to final government approval.
The Union government ratified the decision, raising the interest rate from the previous year’s low of 8.10%.
Beneficiaries of the Interest Rate Hike
The EPF currently has over six crore subscribers, who will benefit from the higher interest rate of 8.15% for the financial year 2022-23.
EPFO’s field offices have been instructed to credit the increased interest rate into the subscribers’ EPF accounts.
Approval Process
The EPFO trustees approved the rate hike, following which the finance ministry granted its approval for the increase.
The Central Board of Trustees (CBT) of the EPFO, led by the Union Labour and Employment Minister, is the apex decision-making body responsible for making such decisions.
Justification for the Interest Rate Increase
The CBT noted that the interest rate of 8.15% and a surplus of Rs 663.91 crore are higher compared to the previous year.
It cited the EPFO’s ability to distribute higher income to its members during various economic cycles while maintaining minimal credit risk.
The EPFO’s investment credit profile was deemed favorable, making the EPF interest rate more attractive than other comparable investment options available to subscribers.
EPF Contribution Details
Contributions to the Employees’ Provident Fund (EPF) are mandatory for both employees and employers.
Employees contribute 12% of their wages to their EPF accounts, while employers contribute 3.67% to the EPF account.
The remaining 8.33% of the employer’s contribution is allocated towards the Employees’ Pension Scheme (EPS).
Interest earned on EPF deposits will be taxable if the total deposits in an EPF and voluntary provident fund (VPF) account exceed Rs 2.5 lakh in a financial year.
Key Points About Employees Provident Fund Organisation (EPFO):
Employees Provident Fund Organisation (EPFO) is a statutory body under the Ministry of Labour and Employment, Government of India.
It manages the Employees’ Provident Fund (EPF), a social security scheme for salaried employees in India.
EPFO’s primary objective is to promote retirement savings and provide financial security to employees after retirement.
Both employees and employers are required to make contributions to the EPF account, with employees contributing 12% of their wages and employers contributing 3.67%.
The EPF interest rate is determined by the EPFO’s Central Board of Trustees (CBT) and is subject to government approval.
EPFO also manages the Employees’ Pension Scheme (EPS), where a portion of the employer’s contribution goes towards pension benefits.
EPFO provides various online services, including EPF balance check, claim status, and UAN (Universal Account Number) activation.
EPF contributions and interest earned are tax-exempt up to a certain limit, but interest exceeding the limit may be taxable.