Employees Provident Fund Organisation, the body regulating the Provident fund commonly known as PF, has sliced the interest rates on the Provident fund deposits. The retirement fund body announced the decision after a meeting of its trustees.
The Employees' Provident Fund Organisation, EPFO has declared 8.55 per cent interest rate for 2017-18 for its about 5 crore members. According to The Indian Express, Labour Ministry suggested that the decision came in accordance with the Finance Ministry's advise which indicates that the rate cut this year will help in a hike in EPF next year.
The decision to slash rates comes after this year's Union Budget proposal made provisions for the government to pay 12% of wages to the EPF contribution on behalf of new employees for initial three years.
EPFO, India's retirement fund manager, cited lower returns from its investment in debt instruments as the reason for the rate cut.
On the administrative charges, Gangwar said the CBT has chose to reduce the administrative charges from 0.65 per cent to 0.50 per cent of total wages, which are paid by employers.
It also took note of the EPFO participation in the disinvestment program of the government by investing in the Bharat 22 ETF to the tune of 2024.75 crore rupees. At present, all those units employing 20 or more employees are mandatorily covered under the social security schemes run by the EPFO and the threshold has now been reduced to 10 workers. This amount helped it to bridge the income gap and offer a still-attractive rate, especially when you compare it to other small savings schemes like the ever-popular Public Provident Fund (PPF) earning 7.6 per cent, a multi-decade low.
Reacting over the development, the Congress has accused the Narendra Modi government of "back stabbing" honest tax payers by lowering the interest rate on EPF.