EPFO Interest Rate For FY23 Has Been Set By Government At 8.15%
The 8.15% interest rate that the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) had recommended for its more than 6 crore subscribers for the fiscal year 2022–2023 was approved by the government on Monday. The central government has approved the EPFO interest rate to be credited into members’ accounts, according to a circular issued today by the EPFO.
As per custom, the Ministry of Labour and Employment forwarded the Ministry of Finance’s recommendation regarding the interest rate for approval. Following the government’s approval of the interest rate, the EPFO will now begin crediting the previous fiscal’s interest rate to EPF subscribers.
According to the EPFO circular, the Ministry of Labour and Employment, Government of India, has received approval from the Central Government under paragraph 60(1) of the Employees’ Provident Fund Scheme, 1952, to credit interest at 8.15% for the year 2022–2023 to the accounts of each member of the EPFO Scheme following those provisions.
This was one of the EPFO interest rate approvals that the Finance Ministry gave in the shortest time. On June 3 of last year, the central government approved the interest rate for 2021–2022. The period between the approval and the final crediting of the interest to member accounts would be crucial, though. Despite an early nod in June, many EPFO subscribers last year complained about the delay in crediting the interest rate. The Finance Ministry then clarified in October that there is no interest rate reduction for EPFO subscribers and that the reason for the delay in the crediting of the interest rate for FY22 is the software upgrade required for the last year’s tax reforms.
The Central Board of Trustees (CBT) of the EPFO recommended an interest rate of 8.15 percent in March of this year for its more than 6 crore subscribers for the current financial year 2022–23, a slight increase from the previous year’s recommendation of 8.1 percent. The retirement fund body will have a surplus of Rs. 663.91 crore following the 8.15 percent payout, according to a statement issued at the time by the Ministry of Labour and Employment.
EPFO’s shortfall
When an 8.1% interest rate for the year was recommended in March 2022, the EPFO recorded a deficit of about Rs 197 crore in 2021–22 compared to an estimated surplus of Rs 350–400 crore for the year. The Finance Ministry approved an 8.1% rate for 2021–22, which was the lowest in four decades.
The Fund’s balance fell to a deficit in the previous fiscal year 2021–2022 primarily as a result of several exempted establishments approaching the EPFO about giving up their exempt status. A total of 83 cases were received for giving up exempt status, and the CBT was presented with five of those cases for review.
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Over time, the finance ministry has questioned EPFO’s retention of such a high rate and has encouraged it to lower it to a level below 8%. When compared to other savings instruments, the EPFO rate is still among the highest, with small savings rates ranging from 4.0% to 8.2%.
