The approved PF rate on Diwali 2021
The rate of interest on PF for the accounting year of 2020-21 will be 8.5percent; Read to know more:
In the decision taken just before the auspicious occasion of Diwali by the Finance Ministry, the Rate of interest has been approved 8.5 percent on the provident funds for the year 2020-21.
The decision has enabled the Employees’ Provident Fund Organisation (EPFO) to credit interest in the accounts of beneficiaries.
The labour ministry with the approval of the ministry had notified the rate on Friday, according to the reports the EPFO has an active subscribers base of more than 6.7 crores and 6.9 lakh establishments.
The interest rate has been decided on the income of Rs 70,300 Crore from the profitable sale of debt and equity investments this leaves a surplus of approx Rs 300 crore with EPFO.
With this it is decided by the Central Board of Trustees of the retirement fund body that the rate of interest for the financial year of 2020-21 is to be retained at 8.5 percent, this decision was made to save the returns on equity investments.
The EPFO has decided to liquidate the investment in equity for FY2021 thus the recommended interest rate was a combination of income from interest received from the debt investment and as the income realised from the equity investment which is supposed to benefit people itself.
The PF deposits have been retained of the interest rate by EPFO at a similar rate that was in the last financial year of 2019-20 even with the growing rate of withdraws that happened because of the impact that Covid did on the personal resources of people all over the country. The EPFO has settled for 56.79lakh claims worth Rs 14,310.21 crore that were provided under the advance facility until December 31st.
The finance ministry over the years has questioned the high rate that was retained by EPFO and has directed to decrease the rate at approx 8 percent level in the aspect of the overall interest rate scenario.
The EPOF rate continues to be highest among the other savings instruments. Small savings rates range from 4 percent to 7.6 percent and had continued to be the same even with the change in market rates.
The Finance Ministry in all the previous years has questioned the interest rate of 8.65 percent beside the EPFO’s exposure to IL&FS till the similar risky entities. During the September of last year the CBT recommended on splitting up the payment of interest for the financial year of 2019-20 in thow parts citing the “exceptional circumstances arising out on Covis-19” however from Jan 2021 onward, the EPFO began to credit the interest in one go.
Know your PF:
Provident fund was started as a government managed retirement savings scheme for employees, the employees through this plan collect a part of their monthly income, this money is later given to them at the time of retirement following the similar pattern the other finance companies now provide a PF in which you deposit a part of your income, these companies further invest the deposited amount in the market and provides you with some percentage of gains in return, sometimes it is termed as the safest form of investment.
There are quite a few types of Provident funds:
-The general PF is the one maintained by government.
-The recognized PF is applicable to all the privately owned organisations with more than 20 employees,
- The Public Provident Fund (PPF) is a voluntary investment where a person can invest for as low as Rs 50 and as high as Rs 1.5 Lakh, the money then cannot be withdrawn for a certain period of time , usually the lock in period is of 15 years.
