The Employees' Provident Fund Organisation (EPFO) is expected to keep the interest rate on provident fund deposits for 2024-25 close to last year's 8.25 percent. This will be discussed when the EPFO’s central board of trustees (CBT) meets on February 28.
For 2023-24, the EPFO gave an 8.25 percent interest on earnings of Rs.1,07,000 crore. This was the highest return, based on a total of around Rs.13 lakh crore. This was higher than the 8.15 percent interest offered in 2022-23, which was based on Rs.11.02 lakh crore.
Before it is officially announced and credited to accounts, the finance ministry must approve the interest rate suggested by the EPFO and the CBT. The interest is usually credited in the second half of the following year.
The CBT, which makes key decisions for the EPFO, is led by the labour and employment minister and includes other members from employers, employees, state governments, and the labour ministry.
Before deciding on the interest rate, EPFO’s investment and accounts committees will meet next week to review the organisation's financial health. This will help ensure there are enough funds for any emergencies.
Even though the EPFO has seen better returns from investments and growth in subscribers, there has been a rise in claim settlements. This year, the EPFO handled over 50.8 million claims worth Rs.2.05 lakh crore, compared to 44.5 million claims worth Rs.1.82 lakh crore last year. The committees are working to propose an interest rate similar to previous years.
Why the Interest Rate Matters for Employees?
As per the EPFO Act, employees contribute 12 percent of their basic pay and dearness allowance to their PF account, and their employer contributes the same amount. Out of the employer's contribution, 3.67 percent goes to the EPF account, while 8.33 percent is deposited in the Pension Scheme (EPS).
The CBT last met on November 30, 2024, and decided that interest would be paid to members till the settlement date. Previously, interest-bearing claims were not processed from the 25th to the end of the month to avoid members losing interest. Now, thanks to this new decision, these claims will be processed for the full month. This will help reduce delays, ensure timely settlements, and make better use of resources, as mentioned in the earlier report.