EPFO Retains Interest Rate at 8.25% for FY 2023-24
The Employees Provident Fund Organisation (EPFO) has announced that it will maintain the interest rate at 8.25% for the current financial year. This decision, made by the central board of trustees, is pending approval from the finance ministry before the interest can be credited to the accounts of approximately 70 million subscribers. The EPFO’s interest rate continues to offer competitive returns compared to other fixed-income options.
Competitive Returns for Subscribers
The EPFO’s interest rate of 8.25% stands out in the current financial landscape, particularly when compared to other savings instruments. For instance, the Public Provident Fund (PPF) currently offers a lower interest rate of 7.1%. While some banks provide fixed deposit rates exceeding 8%, these returns are subject to taxation, diminishing their appeal. For individuals in the 30% tax bracket, the effective post-tax return on fixed deposits can drop to around 5.25%.
The EPF’s tax-free interest (up to a specified limit) makes it an attractive choice for salaried individuals seeking stable and reliable growth for their savings. An official statement emphasized the EPFO’s strong credit profile and its commitment to delivering competitive returns to its members, reinforcing the scheme’s appeal amidst market volatility.
Amendments to the EDLI Scheme
In addition to the interest rate announcement, the EPFO board has introduced significant amendments to the Employees’ Deposit-Linked Insurance (EDLI) scheme. One key change is the establishment of a minimum benefit of Rs 50,000 for EPF members who pass away without completing one year of continuous service. This amendment is expected to enhance benefits for over 5,000 cases of in-service deaths annually.
Moreover, the EDLI benefits will now be applicable if a member dies within six months of their last contribution. This change aims to provide greater security and support to the families of EPF members, ensuring that they receive timely financial assistance during difficult times.
Continuous Service Clause Revised
The EPFO has also revised the continuous service clause within the EDLI scheme. Previously, any gap of even a day between jobs could disqualify a member from receiving benefits due to the requirement for one year of continuous service. The new guidelines allow for a gap of up to two months between employment spells to be considered as continuous service. This adjustment is expected to benefit many workers who frequently change jobs, ensuring that they remain eligible for EDLI benefits despite short employment breaks.
These changes reflect the EPFO’s ongoing commitment to adapt its policies to better serve its members and enhance the overall effectiveness of its insurance schemes.
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