Home >Money >Personal Finance >EPF interest rate for 2020-21 fixed at 8.5%. Key thing to know

The Employees’ Provident Fund Organisation (EPFO) announced to retain 8.5% rate of interest on provident fund deposits for the current financial year 2020-21. "The interest rate would be officially notified in the government gazette following which EPFO would credit the rate of interest into the subscribers’ accounts," the ministry of labour and employment said in a statement. EPFO has more than five crore active subscribers.

"Since FY 2014 EPFO has consistently generated returns not less than 8.50 percent. A high EPF interest rate along with compounding , makes a significant difference to gains of subscribers," the statement mentioned.

1) There have been speculations that the retirement body may lower the interest rates on provident fund deposits for the fiscal 2020-21 post the COVID-19 economic downturn throughout 2020. However, the retirement body decided to keep the interest rate unchanged.

2) "The EPFO announcement of the PF rate at 8.5% is a welcome news for all subscribers considering that all other interest rates are falling. There was anticipation that the COVID impact would be seen in PF interest also. However now that worry is put to rest," said Aarti Raote, Partner, Deloitte India.

3) Last year, in March, EPFO had reduced the interest rate on provident fund deposits to a seven-year low of 8.5% for 2019-20. The board earlier said it would pay 8.5% interest to its subscribers for the year ended 31 March in two installments— 8.15% from debt investments and 0.35% from equity.

4) The interest rate was 8.65% in 2018-19. The EPFO had provided 8.55% interest rate to its subscribers for 2017-18. The interest rate was 8.65% in 2016-17.

5) "EPFO over the years has been able to distribute higher income to its members, through various economic cycles with minimal credit risk. Considering the high credit profile of the EPFO investment, the interest rate of EPFO is considerably higher than other comparable investments avenues available for subscribers," the ministry said.

"For FY 2021, EPFO decided to liquidate investment in and the interest rate recommended is a result of combined income from interest received from debt investment as well as income realized from equity investment. This has enabled EPFO to provide higher return to its subscribers and still allowing EPFO with healthy surplus to act as cushion for providing higher return in future also," the statement mentioned.

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