March 4, 2021 4:58:38 am
The Central Board of Trustees of retirement fund body Employees’ Provident Fund Organisation (EPFO) is likely to finalise the interest rate for financial year 2020-21 in a meeting on Thursday. The Board is likely to consider a lower interest rate than the seven-year low of 8.5 per cent paid out to its subscribers for the previous financial year.
CBT members said a meeting was held before the meeting on Wednesday where discussions on the investment portfolio of the retirement fund body took place. The recommendation for the interest rate issue is expected in the meeting slated to be held in Srinagar on Thursday. The Board is expected to lower the interest rate than last year’s level in view of higher number of withdrawals and lower contributions in the aftermath of the pandemic.
Till December 31, 2020, the EPFO had settled 56.79 lakh claims worth Rs 14,310.21 crore provided under the advance facility after the Covid-19 pandemic. 197.91 lakh final settlement, death, insurance and advance claims worth Rs 73,288 crore were settled during April-December FY12. Exempted establishments, which run their own PF trusts, had also settled 4.19 lakh claims disbursing Rs 3,983 crore.
In March last year, the CBT — headed by Labour Minister Santosh Gangwar — had recommended 8.5 per cent interest rate for EPF subscribers for 2019-20. Then, that September, the CBT recommended splitting payment of the interest rate of 8.5 per cent for financial year 2019-20 into two parts, citing “exceptional circumstances arising out of Covid-19.” However, EPFO began to credit it in one go from January.
The Finance Ministry has been nudging the EPFO to reduce the rate to sub-8 per cent level in line with the overall interest rate scenario. Small savings rates range from 4.0-7.6 per cent, which have been kept unchanged for the January-March quarter. It had questioned the 2018-19 interest rate of 8.65 per cent as well, besides the EPFO’s exposure to IL&FS and similar risky entities.
The government, in the Budget for FY22, has proposed taxing interest on higher contributions to the EPF. Interest on provident fund contributions exceeding Rs 2.5 lakh per year will be taxed beginning the next financial year.
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