The Central Board of Trustees (CBT) of EPFO, has decided to reduce the applicable rate of interest on employee provident fund (PF). In the previous financial year, the rate of interest was 8.65%, which has been reduced by 15 basis points to 8.5% for the current financial year. This came as a shock to a salaried class, which was hopeful that CBT may at least keep the interest rate the same as the previous Financial year if it doesn’t increase the interest rate. But based on the income projections by EPFO, CBT decided to cut the applicable interest rate on PF.
Despite this disheartening news of a reduction in the applicable interest rate on PF, the fund still is a profitable saving scheme in the long term. An employed or salaried person gets an entitlement of a PF account when he starts a job. Under this scheme, the employee deducts and amount of 12% from the basic salary of the employee and also deposits an equal percentage in his PF account. Year over year, the PF amount accumulates interest on it, and as the salary of the employee increases, so does his savings in the PF account. Thus, every year, he ends up saving money for his pension as well as for rainy days and the savings increases with time.
Besides, the members of EPFO are also entitled to a life insurance cover ranging from a minimum of Rs. 2.5 lakhs to Rs. 6 lakhs. This insurance cover is provided free of any cost, and the employee doesn’t have to pay any premium for the same.