EPF Interest Rate 2021-22, What is the PPF Interest Rate 2021-22, EPF Interest Rate Slashed, Ebizfiling

All you need to know on EPF Interest Rate 2021-22, PPF interest Rate 2021-22, and EPF Interest Rate Slashed

Introduction

The EPFO (Employees Provident Fund Organisation) has lowered interest rates from 8.5 percent in the fiscal year 2020-21 to 8.1 percent in the fiscal year 2021-22. Since the EPFO credited interest rates of 8% in 1977-78, it has been the lowest in more over four decades. Furthermore, the Finance Minister stated that the EPF rates are higher than those of other pension funds. In this article, we will look into the Employee Provident Fund (EPF) Interest Rate 2021-22, “What is the PPF Interest Rate 2021-22?”, and EPF Interest Rate Slashed.

 

Before going through the Employee Provident Fund Interest Rate slashed and “What is the PPF Interest Rate?” Let’s have a quick look at “What is EPF?” And “What is PPF?”

What is EPF (Employee Provident Fund)?

The Employee Provident Fund (EPF) is a retirement savings plan that provides all salaried employees a monetary reward when they retire. The procedure would be overseen by the Employee Provident Fund Organisation of India. Any company with more than 20 employees is required to register with the EPFO (Employee Provident Fund Organization).

 

Related read: Process for EPF withdrawal online Claim

What is PPF (Public Provident Fund)?

The National Savings Institute of the Ministry of Finance developed the Public Provident Fund in 1968 as a savings-cumulative-tax-saving device in India. The scheme’s principal goal is to encourage people to save small amounts of money by providing a safe investment with tax benefits.

CBDT Recommendation for EPF Interest Rate 2021-22

  • For FY 2021-22, the EPFO Central Board of Trustees (CBT) suggested an EPF interest rate of 8.1 percent.

  • It is significantly higher than the 5.4 percent yield on SBI’s 10-year fixed deposit.

  • Furthermore, the rates on minor savings plans like NSC, PPF and others range from 6.8% to 7.1 percent.

  • The EPFO board’s central trade union representatives slammed the decision to reduce EPF Rates from 8.5 percent to 8.1 percent, citing rising retail inflation as a reason.

However, in light of the Russian invasion of Ukraine and the unpredictable Indian financial markets, the EPFO Central Board of Trustees decided to reduce the EPF Interest rate. The EPFO does not wish to invest EPF members’ money in high-risk products and instead wants to focus on reliable returns for social security purposes. Furthermore, the EPFO only releases EPF rates after the Government has given its permission through the Ministry of Finance.

Information on EPF Interest Rate Slashed

Employee Provident Fund Organization determines the EPF Interest Rate based on its deposit profits. However, while the EPF corpus has increased by 13%, interest income has increased by 8%.

 

85 percent of the EPFO’s assets are invested in debt instruments such as government securities. The remaining 15% is invested in equity instruments via Exchange Traded Funds (ETFs). The EPF interest payments are calculated using earnings from stock and debt investments.

 

EPFO prioritizes investment safety and takes a cautious approach rather than investing extensively in riskier financial items. For the FY 2021-22 EPF interest payout, the EPFO (Employee Provident Fund Organization) liquidated equity instruments worth INR 12,785 crore and might use capital gains of roughly INR 5,529 crore.

 

Even after paying EPF subscribers an interest rate of 8.1 percent for FY 2021-22, the EPFO has a surplus of INR 450 crore. It acts as a financial safety net in times of geopolitical uncertainty and enables EPFO (Employee Provident Fund Organization) to offer subscribers a greater interest rate in the future.

What is the PPF Interest Rate 2021-22?

The Ministry of Finance has kept the current PPF account interest rate of 7.10 percent per annum for the quarter from January 2022 to March 2022 of the financial year 2021-22. The interest on the public provident fund is computed every month on the account balance with the lowest balance at the closing of the fifth day and the last day of the month.

 

Every month, interest is calculated and credited to the investor’s account at the end of the year. To earn interest for the full month, the investor needs to invest a specific amount of money every month before the 5th. In this method, the investor can get the best possible return on his or her investment.

Benefits of investing in PPF (Public Provident Fund)

  • The amount you deposit in their PPF (Public Provident Fund) account is deductible under Section 80C of the Income Tax Act if you put up to INR 1 lakh every year. Contributions to a PPF account made by an assessee’s spouse and/or children are likewise tax-deductible under Section 80C.

  • The money in a PPF account cannot be used to pay off debts or liabilities. The money in a PPF account belongs to the account holder for the rest of his or her life and is due to the account holder’s nominee after his or her death.

Conclusion

PPF Interest rate is decided by the government on Quarterly basis, and it is one of the safest mode for Investment. Among fixed-income assets, the EPF currently has one of the highest interest rates. When compared to bank FDs, it is a tax-efficient investment. In a word, the EPF is a great way to help you reach your long-term financial goals.

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Author: zarana-mehta

Zarana Mehta is an MBA in Finance from Gujarat Technology University. Though having a masters degree in Business Administration, her upbeat and optimistic approach for changes led her to pursue her passion i.e. Creative writing. She is currently working as Content Writer at Ebizfiling.

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