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Good news for employees, Modi government likely to keep PF interest rate unchanged

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In a good news for employees, the Narendra Modi government is likely to keep interest rate on Provident Fund unchanged, according to Indian Express report. It has been learnt that the ruling BJP-led NDA dispensation is working on this and is likely keep the rate at last year’s level of 8.65 per. The central government will dip into the shares held by Employees Provident Fund Organisation (EPFO) for the extra 0.15 percent payout. The government is planning to sell some shares that the EPFO has bought since August 2015 to shore up the return at 8.65 percent. The EPFO is likely to sell shares worth Rs 2,000 crore to book an estimated extra income of Rs 850 crore. This additional gain of Rs 850 crore would be ploughed in as total earnings to determine the PF rate.

“The Central Board of Trustees of EPFO would be meeting next month to finalise the PF rate and the modalities of the share sale. We will be asking the fund managers to cut down their commission to pass on the maximum benefit to the PF subscribers,” according to report. “However, the final (income) number would depend on the share prices on the day of the sale and there could be a little tweaking (in the interest rate). We are aiming to keep the rate unchanged from last year,” the report says.

The old-age funds body provided 8.65 per cent for fiscal year 2016-17, down from 8.8 per cent in 2015-16 and 8.75 per cent in 2013-14 and 2014-15.

Earlier, it was learnt that retirement fund body EPFO may lower interest rate on provident fund deposits this fiscal compared to 8.65 per cent provided to its 4.5 crore members for 2016-17. The Employees’ Provident Fund Organisation (EPFO) is likely to cut interest rate on the grounds that it is directly crediting exchange trade funds (ETF) units into provident fund accounts and lower yields on other investments, particularly bonds, an official had said. “Employees Provident Fund Organisation may cut rate of return on provident fund deposits for 2017-18 due to lower income on bonds and its plan to credit ETF investments directly into the account of subscribers,” the senior official had said. However, the official had said the EPFO is still to work out the income projection for the current fiscal, which would become the basis for crediting rate of interest in subscribers account for this fiscal.

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