The interest rate to be provided by the Employee Provident Fund Organization (EPFO) for fiscal year 2020-2021 is still awaiting approval from the finance ministry, a senior labor ministry official said. “The proposal had been sent to the Ministry of Finance for approval. It has not yet been ratified by them, ”the official said. Indian express.
The Central Board of Directors of the Fund (CBT) had recommended in March the maintenance of the interest rate of 8.5% for 2020-2021. This rate, the same as last year, is the lowest offered by EPFO in eight years.
The recommended interest rate for FY21 is by standard ratified by the Ministry of Finance, after which it is notified by the Ministry of Labor. The Ministry of Finance pushed EPFO to cut the rate below 8% in line with the overall interest rate scenario.
Meanwhile, EPFO is working on the implementation of the budget proposal to tax interest income on contributions made to EPF in excess of Rs 2.5 lakh (for private sector employees ) and Rs 5 lakh (for public sector employees). “The EPFO is working on the separation of taxable and non-taxable contributions in the accounts of subscribers. This needs to be done for about 1.2 lakh of accounts and not for all active 5 crore accounts, so it won’t be a major issue for those subscribers to separate, ”the official said.
The tax department had recently notified rules to implement the budget announcement. The budget proposal noted that the government has found instances where some employees contribute huge sums to these funds and receive tax exemption at all stages – contribution, interest accumulation and withdrawal. In order to exclude high net worth individuals (HNI) from benefiting from high tax exempt interest on their large contributions, the government had proposed to impose a tax exemption threshold. This will be applicable for all contributions from April 1, 2021. The tax service recently notified rules to implement the budget announcement.