Unable to see interest part in EPF account? Finance Ministry issues clarification
Premium- The Finance Ministry in a tweet has attributed that the subscribers are not able to see the interest credit due to a'software upgrade'
The Finance Ministry has issued a clarification on why the subscribers of the Employees’ Provident Fund (EPF) are not able to view the interest credit in their retirement savings account. EPF subscribers will get an interest rate of 8.1% for 2021-22 in their retirement savings accounts as announced by the government earlier.
The Finance Ministry in a tweet has attributed that the subscribers are not able to see the interest credit due to a"software upgrade" to account for the changes in taxation laws on PF savings. The ministry tweeted,"There is no loss of interest for any subscriber. The interest is being credited to the accounts of all EPF subscribers. However, that is not visible in the statements in view of a software upgrade being implemented by EPFO to account for change in the tax incidence."
"For all outgoing subscribers seeking settlement and for subscribers seeking withdrawal, the payments are being done inclusive of the interest," the Finance Ministry said in another tweet.
The Finance Ministry issued the clarification in response to a tweet from former Infosys Technologies’ director Mohandas Pai. Earlier Mohandas Pai in tweet tagging Finance Minister Nirmala Sitharaman, Prime Minister's Office and PM Narendra Modi has tweeted,"Dear EPFO, where is my interest? @PMOIndia @narendramodi Sir need reforms! Why should citizens suffer because of bureaucratic inefficiency? Pl help @DPIITGoI @FinMinIndia @nsitharaman @sanjeevsanyal.
How EPF interest is calculated:
Once the interest rate for a financial year is notified, and the current year ends, EPFO calculates the month-wise closing balance and then the interest for the whole year. It is calculated by adding the monthly running balance and multiplying it with the interest rate /1200.
In case a member is taking a final settlement and the interest for the current year is not notified, interest is credited on the basis of the rate declared for the immediately preceding year.
If any sum is withdrawn during the current year, interest from the beginning of the year till the last date of the month preceding the month in which withdrawal took place is taken into account.
No interest is calculated on pension contribution since benefits are based on the service length and average wages at the time of exit, whether the benefit is through pension or withdrawal benefit, says EPFO. Of the employer's 12% contribution, 8.33% goes towards pension corpus.
Interest is separately calculated for the employee share and employer share of provident fund.
EPF interest rate for 2021-22 reduced to 8.1%
Earlier, in March this year the Employees' Provident Fund Organisation (EPFO) had decided to lower the interest on provident fund deposits for 2021-22 to 8.1% from 8.5% provided in 2020-21.
According to an EPFO office order , the Ministry of Labour and Employment has conveyed approval of the central government to credit 8.1 per cent rate of interest for 2021-22 to each member of the EPF scheme.
The 8.1 per cent EPF rate of interest is the lowest since 1977-78, when it stood at 8 per cent. The 8.5 per cent interest rate on EPF deposits for 2020-21 was decided by the Central Board of Trustees (CBT) in March 2021.
It was ratified by the finance ministry in October 2021. Thereafter, the EPFO issued directions to field offices to credit the interest income at 8.5 per cent for 2020-21 into the subscribers' account.
An EPFO trustee, K E Raghunathan, who represents employers, said the speed with which the ministries of labour and finance have cleared the interest rate is really appreciable, considering the dire need of funds in the hands of employees and it will help them meet expenses such as educational needs of their children.
In March 2020, the EPFO had lowered the interest rate on provident fund deposits to a seven-year low of 8.5 per cent for 2019-20, from 8.65 per cent in 2018-19.
The EPF interest rate provided for 2019-20 was the lowest since 2012-13, when it was brought down to 8.5 per cent. EPFO had provided 8.65 per cent interest rate to its subscribers in 2016-17 and 8.55 per cent in 2017-18.
The rate of interest was slightly higher at 8.8 per cent in 2015-16. It had given 8.75 per cent rate of interest in 2013-14 as well as 2014-15, higher than the 8.5 per cent for 2012-13. The rate of interest was 8.25 per cent in 2011-12.
*With inputs from agencies
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