BENGALURU: Retirement fund body Employees’ Provident Fund Organisation (EPFO) on Tuesday hiked interest rate on employees’ provident fund(EPF) to 8.15 per cent for 2022-23 from 8.1 per cent in the previous year.
The Central Board Trustees (CBT)’s recommendation involves distribution of more than Rs 90,000 crore in the members’ account on the total principal amount of about Rs 11 lakh crore, which was Rs 77,424.84 crore and Rs 9.56 lakh crore, respectively in the FY 2021-22, the Ministry of Labour and Employment said. The total income recommended for distribution is highest till date and last year’s 8.1 per cent was the lowest in four decades.
The growth in income and the principal amount is respectively more than 16 per cent and 15 per cent when compared to the previous fiscal, the statement said. Experts said the move to hike the EPF rates will benefit EPF account holders, though incremental benefit will be limited as the hike is a meagre 0.05 per cent.
“8.15 per cent in tax-free returns without having to take any credit risk is good for most investors. This is still higher than PPF at 7.1 per cent and FDs offering around 7 per cent(but before taxes). For those who have small EPF contributions due to lower basic pay, should try to increase their contributions via VPF, at least up the Rs 2.5 lakh overall EPF employee contribution limit where returns are still tax-free,” Dev Ashish, founder, Stable Investor, told this newspaper.
Nilanjan Dey, Director, Wishlist Capital, said 8.15 per cent will enable people to tide over inflationary pressures, at least temporarily. In February, RBI revised its inflation projection to 6.5 per cent for 2022-23. Considering that, this is a relief of sorts.
“The only other reliable choice is now deposits. Now, we must see deposits as a somewhat better alternative to debt funds, because in the latter, the indexation benefit has been blunted already. Therefore, higher yielding deposits will hold the key to better returns,” he added. As of January 2023, EPFO has added 14,85,948 subscribers, as per the ministry.
Lohit Bhatia, President- Workforce Management, Quess Corp, said that January also saw the lowest exit numbers, indicating a surge in job creation. “This is reflective of the sentiment shift of workers in India to move from the informal to the formal economy, which holds great potential for the country’s economic growth,” he said.