Jagoinvestor

September 19, 2010

EPF interest rate increases to 9.5% for 2010-2011

On 15 September 2010, the Employees’ Provident Fund Organisation (EPFO) raised the interest rate for EPF accounts by 1% for 2010-11. The organisation increased the interest rate to 9.5% for 2010-11 from 8.5% in the previous year. This 9.5% is the highest in the last five years. However, one needs to understand that the 1% increase is only for EPF accounts and not for Public Provident Fund (PPF) accounts. A PPF account interest rate will continue to remain 8%. The EPFO is one of the largest provident fund institutions in the world. An EPF is a retirement benefit provided only to the salaried class. Each month, a small amount of money is deducted from an employee’s salary which is invested in his EPF account. The employer also contributes an equal amount.

Note that from 2011, EPF will become the top product in the debt fund category as there is no other “safe” products which gives 9.5% or anywhere closer to that post tax. Also, the money received from EPF is tax free after five years. Hence, in the long run EPF is the best option to invest your money. Thus, make sure you invest part of your salary in EPF account. A lot of employees take their entire salary and prefer not to invest in EPF accounts. Also, many employees withdraw their EPF money after they get a new job or just leave their account inactive.

Be Happy but don’t be very happy

“EPF becomes the best debt instrument” is surely good news from return point of view. But, the 9.5% interest rate may not be for long-term. The 1% increase in the EPF has happened because the EPFO has Rs 1,700 crore of surplus money lying in the interest suspense account. Suspense account is the account which has all the unclaimed PF money.

What about Trusts managing their own Providend Funds ?

Note that all the companies do not contribute to EPFO-managed EPF, but they manage their employees provident funds through their own trusts, Now they will have to match this 9.5% interest and it would be a tough thing to achieve . Most probably , a lot of trusts are going to appeal to the finance ministry, that this 9.5% interest rate proposal is taken back , but it looks unlikely to happen (Read more)

EPF money investment in Stock Market ?

An EPF is a long-term investment which salaried individuals have. Hence, some amount of it can be invested in long-term equity instruments. According to the finance ministry, some amount of EPF can be invested in the stock market. But, the central board of trustees (CBT) don’t agree with the same. The CBT has decided not to invest in the stock market. The labour minister Mallikarjun Kharge, who also heads CBT, says, “We had received a letter from the finance ministry asking for parking of a portion of EPFO funds in the stock market. We have received huge opposition from CBT members who oppose the idea of investing in stock markets.” As of now, the EPFO maintains a huge corpus of approximately Rs 3 lakh crore.

No Interest on Dead Accounts ?

Earlier, employees would just leave their jobs but, their EPF accounts would earn interest. However currently, that’s not the case. Now, the accounts, which are not operated for the last three years, will not earn interest. So make sure you either withdraw money from your EPF account or maintain the account. According to EPFO estimates, there are a total of 47 million accounts, of which 30 million, which means 60%/around 57% are inactive accounts. Out of the 30 million inactive accounts, around 10 million accounts (that is 33%) have less than Rs 500 balance.

The EPFO mentions that maintaining inoperative account is quite expensive. Hence, the organisation has decided to stop crediting interest in all the inactive accounts which have not received contributions in the last three years. (Read this article.)

Comments ? What do you think about this move ?

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B D KUKRETI
B D KUKRETI
10 years ago

IF POSSIBLE ANSWER MY COMMENTS TO MY ABOVE MAIL ID

B D KUKRETI
B D KUKRETI
10 years ago

Sir,

Please reply my letter .

B D KUKRETI

B D KUKRETI
B D KUKRETI
10 years ago

Sir,

I have worked 34 years of services with my employer wherein I was the epf member and thereafter my employer has closed the establishment in last October 2013.Now I have jloined new establishemnt but here is not epf scheme which prone within three month.I have not withdrawl my epf ,as 3 years is balance for the completing 58 years.

Please advise me for its withdrawl or transfer to my present company. As per rule of epf intt on my epf deposit will be received upto three years.

BD KUKRETI

manish
manish
Reply to  Jagoinvestor
9 years ago

pl give reply soon

BHOLA
BHOLA
Reply to  B D KUKRETI
9 years ago

Sir, your reply is awaited.Kindly tell the intt giving upto three years

regds.

B.D.KUKRETI

Subhash Mittal
Subhash Mittal
10 years ago

Dear Manish,
I am making contribution in EPF for 30000 ( say) so can I invest 150000 in mine PPF? totalling the CONTRIBUTION and INVESTMENT under PF accounts= 30000+150000=180000?. ( here i understand that under 80c 1.5 lacs wuld be eligible for income tax rebate and exceeding 30000 would be additional investement in PPF )or
I cannot contribute and invest in both these Provident Fund Accounts more than 150000 as per Budget of FY 2014-15? or
I can go for 180000 but i will get income tax deduction on 150000 under 80c. or
I cannot exceed 150000 and if I did ,then the exceeding amount would come back to me or I hav to contact bank for reversal?
Thanks

Subhradeep Biswas
Subhradeep Biswas
10 years ago

Sir,
I have an EPF account which was opened by my previous employer. I was a contributing member for 7 years. After that I joined another organization, where
is not a facility for EPF. My past company is no more exist. Now I would like to get withdrawn EPF A/C. My question who is now authorize to withdrawn my amount in lieu of employer of my past company.

Please suggest the best way forward.

Deepti
Deepti
11 years ago

Sir, I have an EPF account which was opened by my previous employer. I was a contributing member for 4.5 years. After that I joined another organization, where a new PF account was opened in my name. I was not aware regarding the transfer procedure, so I failed to transfer my existing account to this new account. Now I have 2 EPF accounts and I am currently unemployed because I got married and had to leave the job.
My old account is about 8 years old now – out of which I contributed for 4.5 years, but have not withdrawn/transferred anything from that account. New account is only 1.5 years old.
My query is – Is it ok to maintain 2 accounts? Will I get interest in both of them.
I plan to start working after 1-2 years. So, I want to carry forward my old account (so that when it is 10 years old I can avail of the Pension benefits also). Please suggest the best way forward.

satish kumar verma
satish kumar verma
12 years ago

looking to the data of in operative account one should give proper thought onthis matter.actually EPFO is earning huge amount from this contribution .small sectors employees do not get justice in refund .the amount is so small that many peiople do not bother even to with draw.Also there are certain conditions of withdrawl which is not good and favorable to such employees.pension scheme is not useful for high salaried employees as the calculation of pension is disgusting .the ceiling limit of PF contribution is 6500/- then how a good pension can be expected from EPFO. I think compulsion of pension scheme should be withdrawn.s k verma Nashik

Murthy
Murthy
12 years ago

Hello,
I have retired on 25-6-2010. Hence, my PF Claims are settled on 27-2-2011. Please clarify whether I am eligible for this 1 percent interest increase, As PF officials have not reverted. Thanks.

biswajit
biswajit
12 years ago

Hello,

I am interested in Voluntary EPF. But I would like to know 3 things before investing. Can anyone answer my queries?

1) How much interest I would receive from this FY?
2) Can I withdraw the voluntary contribution amount to PF without swiching my present company? If yes, will I face any deduction in the interest rate?
3)Is it required to be in the same company for 5 years to withdraw Voluntary PF? (similar to EPF)

Thanks & Regards,
Biswajit

Nilesh Gode
Nilesh Gode
12 years ago

Hi,

I resigned from my earlier organisation and withdrew my PF in Nov 2010. I have been paid interest @ 8.5%. However, the interest rate applicable for the year 2010-11 is 9.5% as announced by the EPFO office on 15-Sep-2010. On enquiry with the HR dept, I have been informed that as the settlement has happened before the end of the financial year 2010-11, the interest has been paid @8.5%. The company is managing the PF contributions of its employees. I would like to know if the company is right in paying me interest @8.5% instead of the applicable 9.5%.

Regards
Nilesh Gode

Murthy
Murthy
Reply to  Nilesh Gode
12 years ago

Nitesh, Let me know whether any updates on your EPF interest clarification/claim

SKV
SKV
12 years ago

Hi

I have recently resigned from a company where I have worked for more than 7.5 years. I am considering withdrawing my PF amount. I have following 2 question for my case

1) Will the withdrawn amount be taxable?
2) Is it a good idea to withdraw and then manage it?

Thanks
I

Ramesh
Ramesh
12 years ago

Since the rate decided for the FY 2010-11 is 9.5%, what will be the the treatment in respect of those subscribers who had withdrawn their balances before the new rate for 2010-11 came into force? The new rate (ie 9.5%) came into force in the Q1 FY 11.

sanjay
sanjay
12 years ago

Hi,

I am working in a IT industry for 6 years and have changed jobs. I havent withdrawn any amount till date and let the money grow in this account.

There are 2 accounts maintained by the employers. One is EPF getting 9.5 % and other is “EPS”, where Rs 541/- is deducted and saved in this EPS account.

I want to know more about this if you can throw some light. Also my company is not giving any statement on the amount accumulated in EPS as they they say the organization where the amount is stored does not give statements.

Please advise in case if i retire today will i get the EPF money which i know the balance and the EPS (which i dont have any track) ?

Regards,
Sanjay

Akansha
Akansha
13 years ago

I want to know that is PF and pension transfer ( a small amount contributed by employer from PF amt) done by the same entity.

or they are two different?

Deepak Maheshwari
Deepak Maheshwari
13 years ago

Hi Manish

Request your expert comments on VPF

I understand we can invest up to 100% of Basic + DA as VPF, My question is if entire amount invested in VPF will be tax free or only 1 lakh ( 80C) . Suppose my basic is 25K and I choose to contribute entire 25K per month to VPF then does it mean my taxable income decrease by 3 lakhs ? ( Knowing 30% tax rate , isn’t it great saving itself ??) . My whole confusion is due to mixing Provident Fund contribution with 80C where only 1 lakh can become non-taxable

Thanks
Deepak

Kerman
Kerman
13 years ago

Any idea whether the interest earned on EPF is compounded monthly or annually? Or is it at the discretion of the EPF fund manager?

singh
singh
Reply to  Kerman
12 years ago

It is Simple Interest on Monthly Contributions. Then all the monthly interests plus interest on the opening balance is added. This becomes your interest for the whole year. Now this interest and your contribution for that year is added to your opening balance. Next year this summation becomes your opening balance. Therefore simple interest on monthly contributions & then yearly compounding. Hope I have been clear.

KRANTIVIR RAJPUT
KRANTIVIR RAJPUT
13 years ago

More the suspense accounts……….more the epf rate!!! 🙂

Atul Gosain
Atul Gosain
Reply to  KRANTIVIR RAJPUT
13 years ago

Yes. Unless your account is also declared under suspense account 😉

S Jana
S Jana
13 years ago

Our company has not added the 9.5 % rate of interest till date, when I checked with them said they are still waiting from the government to give a green signal for a go. Please let me know whether 9.5 % rate of interest for EPF has been already confirmed and from which date.

S K PATHAK
S K PATHAK
13 years ago

This is new step. EPF amount would fetch interest on the entire money or particularly for this year (say 2010-11) only.

ArtiArti
ArtiArti
13 years ago

Manish, 9.5% is applicable from year 10-11 or from current financial year 11-12.I am confused about the years