The interest rate for 2019-20 was also same at 8.5%, which was a seven-year low. As of now, the EPFO has 6.44 crore contributing members.
The Central Board of Trustees (CBT), the highest decision-making body of the Employees’ Provident Fund Organisation (EPFO), will meet in Guwahati during March 12-13 to decide on the interest rate on employees’ provident fund (EPF) deposits for 2021-22.The meeting was scheduled to be held in the first week of March, but had to be rescheduled due to the labour minister’s other engagements, sources said.
The labour minister heads the CBT.
For 2020-21, the EPFO paid an 8.5% rate of interest to its subscribers on their accumulated EPF deposits. The interest rate for 2019-20 was also same at 8.5%, which was a seven-year low. As of now, the EPFO has 6.44 crore contributing members.
Keeping a small amount as surplus, the EPFO each year distributes the lion’s share of its income from investments as returns to its subscribers on their accumulated deposits. The EPFO does not take money from the exchequer for interest pay-out.
A decision on the rate is taken on the basis of income projection for a financial year. On an annual basis, the EPFO receives approximately `1.8 lakh crore as subscription. It invests the accumulated corpus in debt and equity instruments in the ratio of 85:15.
Since 2015, the EPFO has been investing in exchange-traded funds, to build up an equity portfolio and this has enabled it to fetch higher returns.
The retirement fund body is likely to liquidate some of its investments in ETFs before March this year for paying out interests to its subscribers.
Following the CBT’s recommendations, the proposal goes to the finance ministry for its concurrence. After that, the labour ministry notifies the interest rate before the EPFO starts crediting the same into individual accounts.
The Employees’ Provident Fund & Miscellaneous Provisions Act, 1952, makes it mandatory for all establishments having 20 or more employees earning less than `15,000 monthly wage to join the EPF scheme. Others can also join the scheme voluntarily.
An employee contributes 12% of the basic pay to EPF; her employer contributes 3.67% to the EPF and rest 8.33% towards the employees’ pension scheme.
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