The FM Approved 8.5% Interest Rate On Provident Fund (PF) Deposit For FY21

The union finance ministry has approved the 8.5% interest rate on provident fund (PF) deposit for FY21. So, the Employees' Provident Fund Organisation (EPFO) will credit the interest in the accounts of more than 60 million beneficiaries in India. Just ahead of Diwali, this a good news for the beneficiaries.

The Labour Ministry has to notify the interest rate before EPFO will start to credit the amount into the accounts. The central board of trustees of EPFO is headed by the Union Labour Minister. Earlier in March 2021, Labour Minister approved the 8.5% interest rate for PF for FY 21, the same as the previous FY. After the credit, EPFO will have a surplus of Rs. 300 crore, compared to the preceding FY's surplus of Rs. 1000 crore.

However, the Finance Ministry has questioned the EPFO about the higher interest rate on PFs, compared to interest rates on PPF and other small saving schemes, for the last many years. According to available data, the EPFO made an income of around Rs. 70,300 crore in the earlier FY, including Rs. 4,000 crores by a part of its equity investments, and Rs. 65,000 crore from debt. EPFO usually invests 15% of its annual accruals in equity and debts. Hence, EPFO's central board of trustees recommended the 8.5% interest rate for FY21.

(Also read: Choose Voluntary Provident Fund (VPF) For A Good Tax Saving Investment)

Since the pandemic started in the country, many subscribers of EPFO have withdrawn money from their accounts. However, in March 2020, after the pandemic hit, EPFO reduced the PF interest rate to 8.5%, a 7 years low level. Before that, the interest rate on PF accounts was 8.65% in 2018-19.

(Also read: 3 Ways To Check Provident Fund (PF) Balance, Online And Offline)

(Also read: What Is EPFO UAN, Its Importance, And How To Retrieve UAN Online)