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Central Govt approves reduction of 8.1% interest on EPF deposits for 2021-22, lowest in 4 decades

By Priyanka Verma 
Updated Date

New Delhi: On Friday, The Union government has approved 8.1% rate of interest on employee provident fund or EPF deposits for 2021-22- from 8.5 per cent to 8.1 per cent – for almost five crore subscribers of the Employees’ Provident Fund Organisation (EPFO). The decision, taken by the EPFO in March this year, brings the rate of interest on PF deposits to a more than four-decade low.

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On today, According to the an EPFO office order issued and reviewed, the Ministry of Labour and Employment has conveyed the approval of the central government to credit an 8.1 percent rate of interest for 2021-22 to each member of the EPF scheme. The labour ministry had sent the proposal to the Ministry of Finance for its concurrence.

Now, after the ratification of the interest rate by the government, the EPFO would start crediting the fixed rate of interest for the fiscal into the EPF accounts. Prior to this, the lowest rate of interest prior to this was in 1977-78, when it stood at 8 per cent.

The EPFO invests 85 per cent of its annual accruals in debt instruments, including government securities and bonds, and 15 per cent in equity through ETFs. The earnings from both debt and equity are used to calculate the interest payment.

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.

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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.

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