Provident fund (PF) subscribers will get lower saving rate on their deposits this year as retirement fund body Employees Provident Fund Organisation (EPFO) has taken decision to reduce interest rate on provident fund deposits to 8.65 per cent for 2016-17 from the current 8.8 per cent. The lower interest rate on PF deposits has come in tandem with declining trend in interest rates on savings due to rise in bank deposits post demonetisation.
As per the EPFO’s income projections of Rs 39,084 crore for the current fiscal, providing 8.8 per cent rate of interest on EPF deposits would have left a deficit of Rs 383 crore and at a lower interest rate of 8.7 per cent, there would have been a marginal surplus of 69.34 crore. At 8.65 per cent, the projected surplus for 2016-17 is pegged at Rs 295.91 crore.
The minister of CBT said that the overall scenario is such that interest rates are coming down and we are giving the highest interest rate for workers. It indicates our Ministry and our Prime Minister's commitment to protect the interest of employees and it is to be noted that interest earned on various deposit schemes is taxable, whereas the interest on EPF is exempted from tax.