PF Interest Rate 2016-17: EPFO Recommends 8.65% pending Govt. Approval

PF Interest Rate

EPFO is required to credit interest to each member’s account at such rate as may be determined by the Central Government in consultation with the Central Board of Trustees of EPFO, under the EPF Scheme, 1952. The interest is credited based on monthly running balance. Interest rates are dependent on return on investments (ROI) besides the pattern of investment prescribed by the Govt. from time to time.

A. PF Interest Rate (2016-17): CBT of EPFO recommends 8.65%

Central Board of Trustees of EPFO has decided to recommend PF Interest Rate of 8.65% for its subscribers for the Financial Year 2016-17, keeping in view the Return on Investments, etc., subject to approval of the Ministry of Finance, Govt. of India.

The Minister of State for Labour and Employment (Independent Charge) Shri Bandaru Dattatreya chaired the 215th meeting of the Central Board of Trustees (CBT) of EPFO in Bengaluru on 19 Dec. 2016.

B. PF Interest Rate (2015-16) restored at 8.8% by MoF in line with decision of CBT of EPFO at 8.8%

The MoF has reviewed it’s earlier decision and has restored the PF interest rate for 2015-16 at 8.8% in line with the rate finalised by the CBT of EPFO.

EPFO Circular dt 25 May 2016 reg. Declaration of Rate of Interest on PF for 2015-16

Every year rates of interest on PF accumulations in members accounts are reviewed by the EPFO and a declaration is made after its Central Board of Trustee’s (CBT) meet, which makes review of the revenue generation from the investments made by the EPFO and the prevailing rates of interest on saving schemes. So far, the CBT was considered as the apex decision-making body of EPFO which used to decide on EPF interest rate, whereas the finance ministry used to approve those rates as a matter of protocol.

It was being predicted that this time the PF Interest Rate (2015-16) will be either lowered or maintained at the same level (8.75% of 2013-14 and 2014-15) in view of recent interest rate cuts by the RBI. However, the Financial Panel of EPFO had recommended the PF Interest Rate of 8.95% for 2015-16. The CBT of EPFO reviewed the recommendations of Financial Panel of the EPFO (i.e. rate of 8.95%) and finalised PF Interest rate for 2015-16 @8.8%, i.e. slightly higher than the PF Interest Rate for 2014-15 @ 8.75%.

Now the final rate of PF Interest for 2015-16 is 8.8% as the MoF, on 29th April, 2016, has reviewed it’s earlier decision dt 26 April, 2016 wherein it had slashed the rate from 8.8% to 8.7% while reviewing the advice / decision of EPFO at 8.8%.

This is third roll back by the MoF this year on PF related matters. Recently, the MoF has again faced confrontations from Employees Unions after it’s decision to slash PF Interest Rate. Similarly, it has faced protests in the past in the matters of proposed tax on EPF withdrawals in Budget 2016, PF withdrawal restrictions, etc. wherein the GoI was compelled to withdraw it’s proposal/ decisions.

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