Government sanctions 8.15% interest rate on Employees' Provident Fund for the fiscal year 2023

The Indian government has given the green light to the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO)'s recommendation of an 8.15% interest rate for the financial year 2022-23. The EPFO, which caters to over 6 crore subscribers, will now credit the approved interest rate into the accounts of its members.

Following the customary procedure, the Ministry of Labour and Employment submitted the interest rate proposal to the Ministry of Finance for ratification. With the government's approval, the EPFO is set to initiate the process of crediting the interest rate for the previous fiscal year to the EPF subscribers.

A circular released by the EPFO stated, "The Ministry of Labour and Employment, Government of India, has conveyed the approval of the Central Government under para 60(1) of Employees’ Provident Fund Scheme, 1952 to credit interest @ 8.15% for the year 2022-23 to the account of each member of the EPF Scheme as per the provisions under Para 60 of EPF Scheme, 1952."

Last year's interest rate approval for 2021-22 was granted on June 3, but delays in crediting the interest rate to member accounts raised concerns among EPF subscribers. The Finance Ministry attributed the delay to software upgrades for tax adjustments introduced in the previous year.

For the current financial year 2022-23, the Central Board of Trustees (CBT) of the EPFO recommended a slightly higher interest rate of 8.15%, up from 8.1% for the previous year. Following the payout at 8.15%, the EPFO will have a surplus of Rs 663.91 crore, as confirmed by the Ministry of Labour and Employment earlier this year.

Notably, despite registering a deficit of around Rs 197 crore in 2021-22, the EPFO increased the interest rate to 8.1% for the previous fiscal, the lowest in four decades. This deficit was primarily due to several exempted establishments opting to surrender their exempt status.

Over the years, the finance ministry has advocated for reducing EPFO's interest rate to a sub-8% level. However, the EPFO rate remains one of the highest compared to other savings instruments, with small savings rates ranging from 4.0% to 8.2%.