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.
“It would comprise 8.15% from debt income and the balance 0.35% (gains) from the sale of ETFs (exchange-traded funds), subject to their redemption by 31 December 2020", the retirement fund earlier said.
“There is no going back on the 8.5% rate for FY20, but the current situation has pushed us to go for two instalments. Some of the investments could not be encashed due to the bad market situation. Hence, this new formula," Virjesh Upadhyay, another board member of the EPFO and general secretary of the Bharatiya Mazdoor Sangh earlier told Mint.
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.
Net new enrolments with retirement fund body EPFO grew by 24% to 12.54 lakh in December compared to the same month in 2019, according to the payroll data. The provisional payroll data of EPFO highlights a positive trend for net subscribers base growth, the ministry of labour and employment said in a statement.
Finance minister Nirmala Sitharaman announced in Budget 2021 that interest on employee contributions to provident fund of over ₹2.5 lakh per annum would be taxed, starting from 1 April. "In order to rationalise tax exemption for the income earned by high income employees, it is proposed to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of ₹2.5 lakh," Sitharaman said in her Budget 2021 speech.