EPFO's Decision on Interest Rates

The central board of trustees of the Employees Provident Fund Organisation (EPFO) has made a significant recommendation to retain the interest rate at 8.25% for the current financial year. This decision awaits ratification by the finance ministry, which will affect the accounts of seven crore subscribers.

Why EPF is a Preferred Investment

Compared to other fixed-income instruments, the Employees Provident Fund offers higher and more stable returns, ensuring steady growth of savings. The interest earned on EPF deposits is tax-free up to a specified limit, making it an attractive investment option for salaried individuals. This reflects strong confidence in the credit profile of EPFO's investments and its ability to deliver competitive returns to its members.

Comparison with Other Savings Instruments

At 8.25%, EPFO's returns are significantly higher than those of the public provident fund, which currently offers a 7.1% rate. While some banks offer over 8% on fixed deposits, the interest income will be taxed, and there is no benefit of compounding, making EPF a more appealing option for many.

Amendments to EDLI Scheme

The EPFO board also announced amendments to the Employees' Deposit-Linked Insurance (EDLI) scheme, including a minimum benefit of Rs 50,000 to an EPF member who dies without completing one year of continuous service. This amendment is expected to result in higher benefits for more than 5,000 cases of deaths in service every year.

Changes to Continuous Service Clause

Further, the EPFO board has recommended changes to the continuous service clause, making it easier for members to qualify for EDLI benefits. Now, a gap of up to two months between two spells of employment will be considered as continuous service, a significant improvement from the previous stringent conditions.