Over 6.4 crore individuals working in the organised sector will get a competitive 8.5% return on their employees’ provident fund (EPF) deposits in 2020-21, the authority concerned announced on Thursday. The interest price was very same for 2019-20, which, although a seven-year low, was way larger than the returns little saver could get beneath any other fixed-revenue schemes.
Along with PPF and the Sukanya Samriddhi Account meant for parents of girl kids, EPF is one fixed-revenue instrument that is fully tax-totally free beneath the exempt-exempt-exempt (EEE) regime. Of course, thanks to a proposal in the Union Budget FY22, helpful April 1, 2021, the interest on employees’ contribution to EPF above Rs 2.5 lakh a year will be taxed at the marginal revenue tax price having said that, barely 1% of the EPF subscribers will be impacted by the choice.
After the 228th meeting of Central Board of Trustees of the Employees’ Provident Fund Organsiation (EPFO) held in Srinagar on Thursday beneath the chairmanship of labour minister Santosh Kumar Gangwar, KE Raghunathan, one of the trustees, mentioned: “For the current year, EPFO’s total income from debt and equity is expected to be around Rs 70,300 crore… after paying out 8.5%, it will still have Rs 300 crore surplus.”
EPFO’s accumulated corpus now stands at more than Rs 18 lakh crore. On an annual basis, it receives about Rs 1.3 lakh crore as subscription. The EPFO is permitted to invest its incremental accretions in debt and equity instruments in the ratio of 85:15. Since 2015, the EPFO has been investing in exchange-traded funds, to make up an equity portfolio and this has enabled it to fetch larger returns. It is hoping to enhance the returns in 2021-22, pinning hopes on a increasing marketplace.
Over the years, the EPFO has been in a position to distribute larger revenue to its members, by way of different financial cycles with minimal credit danger, thanks to somewhat higher interest prices and compounding. “This is despite the fact that EPFO has consistently followed a conservative approach towards investment, putting highest emphasis on the safety and preservation of principal first approach. Risk appetite of EPFO is very low, since it involves investing poor man’s retirement savings also,” the labour ministry mentioned in a statement. Like in 2019-20, the interest spend-out for 2020-21 will be cleared in one shot, officials mentioned.
The finance ministry has been placing stress on the labour peer to maintain the RPF price beneath verify, apprehending that larger payouts would enhance the possibilities of the EPFO defaulting, precipitating a liability to the exchequer. “The 8.5% rate definitely means very good returns for the subscribers under current circumstances,” mentioned former chief provident fund commissioner KK Jalan.
The Employees’ Provident Fund & Miscellaneous Provisions Act, 1952, tends to make it mandatory for all establishments obtaining 20 or more staff earning significantly less than Rs 15,000 month-to-month wage to join the EPF scheme. Others can also join the scheme voluntarily. An employee contributes 12% of the standard spend to EPF her employer contributes 3.67% to the EPF and rest 8.33% towards the employees’ pension scheme (EPS).
The month-to-month typical net addition to the EPF subscriber base was 6.54 lakh in 2019-20. But, owing to Covid-19 pandemic, EPF base shrank by 2.36 lakh in April 2020. In current months, the addition of new subscribers was robust, displaying that jobs are returning net addition was 12.54 lakh in December 2020.
Around 1.7 lakh establishments and 74 lakh members returned or newly joined the EPF scheme in April-October 2020, reflecting a gradual revival in financial activity. The quantity of contributing establishments and members to EPFO elevated to 5.04 lakh and 4.58 crore respectively in October from the lows of 3.33 lakh and 3.84 crore in April, the lock-down month.
Subscribers, particularly low-wage earners, have withdrawn massive amounts from EPF in the course of the pandemic period. Between April-August final year, close to `40,000 crore was withdrawn, according to a statement created by the government in Parliament.
As component of the Pradhan Mantri Garib Kalyan Yojana (PMGKY) and Atmanirbhar Bharat, the governemnt took different measures which includes non-refundable Covid advance from the EPF by amending the EPF Scheme, 1952. Also, the Centre paid each the employers and employees’ total 24% share of contribution for six wage months from March to August 2020 for all establishments obtaining up to one hundred staff with 90% of such staff earning a month-to-month wage of significantly less than Rs 15,000.