The Employees’ Provident Fund Organization (EPFO) willl likely to credit the interest on provident fund deposits for the financial year 2020-21 soon, according to reports. Over 6 crore employees will get the benefit by the end of next month.
The retirement body kept the interest rate unchanged on the provident fund deposits at 8.5 per cent for the financial year 2020-21. The decision was taken in the view of more withdrawals and less contribution by the members during COVID-19 pandemic.
In the wake of coronavirus outbreak in the country, the EPFO had reduced the interest rate to a seven-year low of 8.5 per cent for 2019-20 in last March. The interest rate was 8.65 per cent in 2018-19. The EPFO had provided 8.55 per cent interest rate to its subscribers for 2017-18. The interest rate was 8.65% in 2016-17.
Net new enrolments with retirement fund body EPFO grew by nearly 20% to 12.37 lakh in February compared to the same month in 2020, according to the payroll data. The provisional payroll data of EPFO highlighted a growing trend with the addition of 12.37 lakh net subscribers during the month of February, the ministry of labour and employment said in a statement. Of the 12.37 lakh net subscribers added during the month of February 2021, around 7.56 lakh were new members.
“During the difficult time of COVID-19 pandemic, EPFO is committed to provide a helping hand to all its stakeholders,” the ministry said in a statement.
Finance minister Nirmala Sitharaman announced in Budget 2021 that interest on employee contributions to provident fund of over ₹2.5 lakh per annum would be taxed, starting from 1 April. “In order to rationalise tax exemption for the income earned by high income employees, it is proposed to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of ₹2.5 lakh,” Sitharaman said in her Budget 2021 speech.
PF withdrawal citing COVID-19
EPFO has recently allowed its members to withdraw money from the retirement fund as a non-refundable advance. In March, 2020, the central government introduced a special provision under Pradhan Mantri Garib Kalyan Yojana (PMGKY) which would allow the EPF members to withdraw basic pay and dearness allowance (DA) of three months or 75 per cent of their Provident Fund money, whichever is lower as advance. “To support its subscribers during the second wave of COVID-19 pandemic, EPFO has now allowed its members to avail second non-refundable COVID-19 advance. The provision for special withdrawal to meet the financial need of members during pandemic was introduced in March 2020, under Pradhan Mantri Garib Kalyan Yojana (PMGKY),” the ministry said.
EPFO allows subscribers to withdraw non-refundable advance in certain cases like illness, buying a house etc. Now, individuals can withdraw money from their PF accounts, citing COVID-19 pandemic as a reason.