EPF recommends 8.15% interest rate on provident fund for FY23

The Central Board of Trustees (CBT) of the Employees' Provident Fund on Tuesday suggested an 8.15% interest rate on EPF accumulations in members' accounts for the financial year 2022-23.

The interest rate would be officially notified in the government gazette after approval of the Ministry of Finance, following which Employees' Provident Fund Organisation (EPFO) would credit the rate of interest into its subscribers' accounts.

In March last year, EPFO had slashed the interest on EPF to over a four-decade low of 8.1% from 8.5% in FY21.

The Central Board of Trustees recommended the amount balancing both the growth and surplus fund to have safeguards, the Ministry of Labour & Employment says in a statement. The recommended rate of interest of 8.15% safeguards the surplus as well as guarantees increased income to members.

The rate of interest at 8.15% and the surplus of ₹663.91 crore is higher than last year, the ministry says.

The board's recommendation involves distribution of more than ₹90,000 crore in the members' account on the total principal amount of about ₹11 lakh crore which was ₹77,424.84 crores and ₹9.56 lakh crore respectively in FY22.

"The total income recommended for being distributed is the highest till date. The growth in income and the principal amount is respectively more than 16% and 15% as compared to last financial year 2021-22," the labour ministry says.

EPFO claimed that over the years it has been able to distribute higher income to its members, through various economic cycles with minimal credit risk. "Considering the credit profile of the EPFO investment, the interest rate of EPFO is higher than other comparable investment avenues available for subscribers," the retirement fund body claims.

The meeting of the Central Board of Trustees was held in Delhi under the chairmanship of Bhupendra Yadav, Union Minister for Labour & Employment and Environment, Forest & Climate Change. Rameshwar Teli, Union Minister of State for Labour & Employment, Petroleum & Natural Gas and Arti Ahuja, secretary of Labour & Employment and Neelam Shami Rao, central PF commissioner, were also present during the meeting.

The Employee's Pension Scheme (EPS) was introduced in 1995. The scheme, which is administered by the EPFO, provides employees a pension after they reach the age of 58. Both the employee and the employer contribute 12% of the employee's basic salary and Dearness Allowance (DA) to the EPF. While the employee's entire part goes to EPF, the employer's contribution goes to EPS at a rate of 8.33%.

Last month, the retirement fund body said that all eligible members of the Employees' Provident Fund Organisation (EPFO) can now opt for higher pensions by applying jointly with their employers at the retirement fund body’s portal till May 3, 2023.