On the 24th of July, the Union government announced a hike in the interest rate on deposits under the Employees Provident Fund (EPF) scheme for the financial year 2022-2023. It has been increased to 8.15% and it will benefit over 6 crore subscribers in FY23.
It was earlier recommended by the Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO). According to a circular issued on Monday, 24 July, the EPFO said the Ministry of Labour and Employment has conveyed the approval of the central government about the increased EPF interest rate. Additionally, the EPFO has asked the filed offices to start crediting the interest at 8.15 percent on EPF for FY23 into the members’ accounts.
As per the convention, first, the CBT of EPFO deliberates on key issues like interest rate to be given to its subscribers which is based on the projected income of the retirement fund manager. the EPFO is projected to register an income of Rs 90,497.57 crore in FY23.
Then, CBT’s recommendations are forwarded by the Ministry of Labour and Employment to the Ministry of Finance for their ratification. After Finance Ministry’s concurrence, the EPFO notifies about the interest rate for that financial year and starts crediting the rate of interest to the EPF subscribers.
In the current cycle, the Retirement fund body EPFO recommended to raise the interest rate on EPF deposits to 8.15% for FY23 for its over six crore subscribers on the 28th of March, 2023. Now, the EPFO has notified that it has received the concurrence/ratification of the Finance Ministry and would now start crediting the interest rates to their subscribers.
The EPFO circular said, “The Ministry of Labour and Employment, Government of India, has conveyed the approval of the Central Government under para 60(1) of Employees’ Provident Fund Scheme, 1952 to credit interest @ 8.15% for the year 2022-23 to the account of each member of the EPF Scheme as per the provisions under Para 60 of EPF Scheme, 1952.”
According to the Ministry of Labour and Employment, the retirement fund body will be left with a surplus of Rs 663.91 crore after a payout to the subscribers at the increased 8.15% interest rate.
The Employees Provident Fund (EPF) is a compulsory contribution for salaried employees, and employers are required to match this contribution to the EPF account. Every month, employees contribute 12% of their earnings to their EPF account, and the entire contribution is deposited into the account. With 70.2 million contributing members and 0.75 million contributing establishments, the EPFO is the largest retirement fund manager in the country.
When compared to other savings instruments, the EPFO rate remains one of the highest. For example – small savings rates range from 4.0% to 8.2%.