New Year gift to 6 crore PF members, government did this important work

The Finance Ministry has approved a proposal to add 8.5 percent interest in EPF accounts for the financial year 2019-20. This will benefit about 6 crore shareholders of Employees Provident Fund Organization (EPFO). A senior government official told ET that the Labor Ministry would soon notify the interest rate.

In March, the Central Board of Trustees of EPFO approved the 8.5 percent interest rate for the year 2019-20. It was decided in September that this amount of 8.5 percent interest would be sent in two installments (8.15 and 0.35 percent). But the Labor Ministry sent a proposal to the Finance Ministry this month seeking approval to lump 8.5% interest in PF accounts for 2019-20.

How much does EPFO invest?

EPFO invests up to 15% of its incremental corpus in ETFs. EPFO received a minus 8.3 percent return on equity investment in FY 2020 as compared to 14.7 percent in FY 2019. The 8.5 percent interest rate is the lowest in seven years. 8.65% interest was paid in 2018-19. Thus, it is lower by 0.15% in 2019-20 as compared to 2018-19.

According to estimates by the Finance Investment and Audit Committee, after putting 8.5% interest in the accounts of PF shareholders, the EPFO will have a surplus of Rs 700 crore. The idea behind dividing the interest rate into two parts was to have no effect on the savings of EPFO. In the Corona era, people made a fierce PF withdrawal. But EPFO took advantage of the boom in equity markets.