The Employees' Provident Fund Organisation will meet on March 4-5 in Guwahati to decide on the interest rate for its subscribers for the financial year 2021-22. The Finance Investment & Audit Committee (FIAC) will be meeting on Wednesday to discuss the Board's accounts and earnings from investments so far. Interest rate The EPFO Board had in March last year finalised a recommendation of 8.5 per cent interest rate for the previous financial year 2020-21. This rate, the same as last year’s, was the lowest offered by EPFO in eight years. The Fund had started crediting the interest rate for FY21 for its subscribers. "23.59 crore accounts have been credited with an interest of 8.50% for the FY 2020-21," it had said in a tweet on December 20. The EPFO has an active subscriber base of more than 6.7 crore and 6.9 lakh contributing establishments. For FY2021, the EPFO had decided to liquidate investment in equity and the interest rate recommended was a result of combined income from interest received from debt investment as well as income realised from equity investment. The recommendation is then ratified by the Finance Ministry. The EPFO had retained the interest rate on PF deposits for 2020-21 at the same rate as in 2019-20 despite the substantial withdrawals in the wake of Covid’s impact on people’s financial resources. The retirement fund body saw high withdrawals and lower contributions in the aftermath of the Covid-19 pandemic. Until December 31, the EPFO had settled 56.79 lakh claims worth Rs 14,310.21 crore provided under the advance facility. Financial year 2021-22 will be the first year when the government's proposal to tax interest on higher contributions to the EPF will come into place. The Budget for 2021-22 had proposed interest on provident fund contributions exceeding Rs 2.5 lakh per year effective April 1, 2021. The Budget proposal had noted that the government has found instances where some employees are contributing high amounts to these funds and are getting the benefit of tax exemption at all stages — contribution, interest accumulation and withdrawal. With an aim to exclude high net-worth individuals (HNIs) from the benefit of tax-free interest income on their higher-than-designated contributions, the government had proposed to impose a threshold limit for tax exemption. FIAC meeting on Wednesday The investment committee under the EPFO will discuss the Board's earnings. They will submit a recommendation for the interest rate closer to the CBT meeting next month, a Board member said. It will also further discuss the Board's approval for investment of up to 5 per cent of its annual deposits in new asset classes of alternative investment funds (AIFs), including infrastructure investment trusts (InvITs), which the Board had given initial approval in its previous meeting in November. The Board had empowered the FIAC to decide upon the investment options, on a case-to-case basis, for investment in all such asset classes. The EPFO would go for investments in public sector bonds. At present, the National Highways Authority of India (NHAI) and Power Grid Corporation (PGCIL) have launched public sector InvITs. In April last year, the Labour Ministry notified changes in investment options to include units issued by Category I and Category II AIFs regulated by the Securities and Exchange Board of India (Sebi). The EPFO can invest up to 15 per cent of investment in equity, as per the pattern of investment notified by the central government and the internal guidelines of the EPFO approved by the CBT. It had invested Rs 7,715 crore in equity till June 30 this year. Newsletter | Click to get the day's best explainers in your inbox
