The Union government has recently approved an increase in the interest rate on Employees Provident Fund (EPF) deposits to 8.15% for the financial year 2022-23. This decision comes after the EPFO trustees ratified the proposal to raise the interest rates, which were at a four-decade low of 8.10% during the previous fiscal year.
In March 2022, the Employees Provident Fund Organisation (EPFO) reduced the interest rate to 8.10% for FY 2021-22, marking the lowest rate since 1977-78 when it stood at 8.0%.
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 has now ratified this decision, raising the interest rate from the previous year’s low of 8.10%.
The higher interest rate of 8.15% will be a significant benefit to over six crore EPF subscribers for the financial year 2022-23. The EPFO’s field offices have been instructed to credit the increased interest rate into the subscribers’ EPF accounts.
The rate hike was approved by the EPFO trustees, and 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, serves as the apex decision-making body responsible for such determinations.
The CBT highlighted that the interest rate of 8.15% and a surplus of Rs 663.91 crore are higher compared to the previous year. This reflects the EPFO’s ability to distribute higher income to its members during various economic cycles while maintaining minimal credit risk. Additionally, the EPFO’s investment credit profile was deemed favorable, making the EPF interest rate more attractive than other comparable investment options available to subscribers.
The Employees’ Provident Fund (EPF) contributions are mandatory for both employees and employers. Employees contribute 12% of their wages to their EPF accounts, while employers contribute 3.67%. The remaining 8.33% of the employer’s contribution is allocated towards the Employees’ Pension Scheme (EPS).
It’s important to note that 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.
The Employees Provident Fund Organisation (EPFO) is a statutory body under the Ministry of Labour and Employment, Government of India. Its primary objective is to promote retirement savings and provide financial security to employees after retirement through the EPF and EPS schemes. The interest rate on EPF deposits is determined by the EPFO’s Central Board of Trustees (CBT) and is subject to government approval.
EPFO provides various online services, including EPF balance check, claim status, and UAN (Universal Account Number) activation. While EPF contributions and interest earned are tax-exempt up to a certain limit, interest exceeding the limit may be taxable.