EPFO Account Credit: 8.5% Interest Likely for Subscribers By End Of December

Earlier the plans to liquidate some of its investment in ETFs to provide 8.5 percent interest for the last fiscal could not happen because of the unsteady market conditions, but now the market conditions seem to be favourable and there is a possibility to credit entire 8.5 percent at a go.

EPFO Interest Rate: This year may not have gone down well in the history but here’s a good news for EPF subscribers with the retirement fund body EPFO likely to credit 8.5 percent rate of interest for 2019-20. As per the news agency PTI, it is likely that the employees' provident fund (EPF) accounts of around six crore subscribers will get the interest credited at a go by end of December. What has been discussed so far? Earlier in September, the Employees Provident Fund Organisation had decided to split 8.5 percent interest into two installments of 8.15 percent and 0.35 percent in its trustees meet headed by Labour Minister Santosh Gangwar. As per the PTI, the Labour Ministry has sent a proposal to the Finance Ministry seeking approval to credit 8.5 percent rate of interest on EPF for 2019-20 earlier in December. The ratification of the proposal is likely to happen in few days as per the report. On this Ministry of Finance had asked for certain clarifications on the rate of interest for the last fiscal, which were duly addressed. However in March, the EPFO's apex decision making body Central Board of Trustees headed by Labour Minister Santosh Gangwar had already approved 8.5 percent interest rate on EPF for 2019-20. Later in September, the EPFO had decided to honour its commitment to provide 8.5 percent rate of interest for the last fiscal. It has then decided to split the rate of interest into two installments of 8.15 percent and 0.35 percent in view of the pandemic. The decision was taken in "in view of exceptional circumstances arising out of Covid-19, the agenda regarding interest rate was reviewed by the CBT and it recommended the same rate of 8.50 percent to the Central Government. What was the calculation earlier? "It (8.5 percent interest) would comprise of 8.15 percent from debt income and balance 0.35 percent (capital gain) from the sale of ETFs (exchange traded funds) subject to their redemption by 31st December, 2020," CBT had said. As per the PTI, the CBT had recommended accounting such capital gains (from sale of ETFs) in the income of the financial year 2019-20 as being an exceptional case. Earlier, EPFO had to provide 8.15 percent interest on EPF after seeking approval of Ministry of Finance and planned to credit the remaining 0.35 percent rate by December 31, after proposed liquidation of ETFs. The earlier plans to liquidate some of its investment in ETFs to provide 8.5 percent interest for the last fiscal could not happen because of the unsteady market conditions amid the lockdown. However, as per the report, the market conditions are more than favourable as bench mark indices are at record high, there should not be an issue to credit entire 8.5 percent in one go.