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Home >Money >Personal Finance >EPF, PPF interest rate should be equal — suggests SBI research team

The State Bank of India (SBI) economic research team led by Dr. Soumya Kanti Ghosh has advised Government of India (GoI) to bring parity in Employees' Provident Fund (EPF) and Public Provident Fund (PPF) interest rate. The SBI research team made this suggestion while showcasing its findings on whether Indians have become more risk averse post-market aberrations in 2008? The SBI research team went on to add that one of the key components of financial savings of households in India is small savings and its interest rates are administratively determined.

Advising GoI to bring parity in EPF and PPF interest rate the SBI research team pointed out, "PPF is a Government-backed, zero-default risk, long-term small savings scheme akin to quasi floating rate deposits with the objective to provide retirement security to self-employed individuals and workers in the unorganised sectors. We expect the Government to maintain a parity in interest rates between organised sector / EPF (Employees' Provident Fund) and unorganised / PPF for the larger goal of social security."

The SBI research also suggested GoI to remove the 15 year lock-in period for PPF and give the investors the option to withdraw their money within a stipulated time with some sort of disincentive.

Income Tax exemption for SCSS investors

Batting in favour of its suggestion to bring parity in EPF and PPF interest rate, the SBI research team went on to add that the GoI should also think of exempting the income from any tax outgo for Senior Citizen Saving Scheme (SCSS) investors. The SBI research team said that the February 2020 outstanding under SCSS was 73,725 crore. If the amount is given full tax rebate or relaxation up to a threshold level it will have nominal impact on the government exchequer.

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