The Employees Provident Fund Organisation (EPFO) has announced a hike in the interest rate to 8.15% for the financial year 2022-23, up from 8.10% in the previous year. This marks the first increase since the financial year 2018-19.
What Happened? As noted in an Economic Times report, once the Central Board of Trustees (CBT) set the interest rate, the finance ministry is required to notify it before the rate can take effect. Once the interest rate is notified, the EPFO will start crediting it to EPF accounts.
The notified interest rate will also apply to Voluntary Provident Fund (VPF) deposits and to EPF accounts held by exempted trusts.
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Why It Matters? According to provisions under the Employees' Provident Funds and Miscellaneous Provisions Act of 1952, salaried employees must mandatorily contribute to the EPF, and their employers must make matching contributions to their accounts. Employees contribute 12% of their wages to the EPF account on a monthly basis, while employers deposit only 3.67% to the EPF account, with the balance of 8.33% going towards the Employees Pension Scheme (EPS).
This decision to increase the interest rate for the EPF comes while the EPFO is still crediting interest to EPF accounts for the previous financial year, 2021-22.
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