EPF Members Unable To See Interest Due to Software Upgrade: Finance Ministry
Moneylife Digital Team 06 October 2022
The finance ministry has issued a clarification on why the subscribers of the employees’ provident fund (EPF) are not able to view the interest credit in their retirement savings account.
EPF subscribers will get an interest rate of 8.1% for financial year (FY) 2021-22 in their retirement savings accounts as announced by the government earlier. The finance ministry in a tweet has attributed that the subscribers are not able to see the interest credit due to a 'software upgrade' to account for the changes in taxation laws on PF (provident fund) savings.
"There is no loss of interest for any subscriber. The interest is being credited in the accounts of all EPF subscribers. However, that is not visible..." the ministry said, citing the software upgrade being implemented by the Employees' Provident Fund Organisation (EPFO).
"For all outgoing subscribers seeking settlement and for subscribers seeking withdrawal, the payments are being done inclusive of the interest," the ministry revealed, while responding to a tweet from former Infosys Technologies’ director Mohandas Pai.
Mr Pai, in his tweet, tagged prime minister (PM) Narendra Modi and Union finance minister (FM) Nirmala Sitharaman, stating: “Dear EPFO, where is my interest?... need reforms! Why should citizens suffer because of bureaucratic inefficiency? Pl help.”
It may be recalled that for FY20-21, the EPFO board, chaired by the labour minister, had approved an annual dividend of 8.5% for crores of EPF members, but that was only credited into their accounts by December 2021. In March 2022, the EPF rate for 2021-22 was slashed to 8.1%, the lowest level since 1977-78.
The finance ministry approved the nipped EPF rate for 2021-22 in June. Hence, it was expected that members will get interest credited to their accounts soon thereafter.
Mr Pai, in his tweet, also sought interventions from the department for promotion of investment and internal trade under the commerce and industry ministry and Sanjeev Sanyal, a member of the PM’s economic advisory council. The EPFO is the country’s largest retirement fund manager, handling assets of over Rs16 lakh crore, and comes under the administrative control of the Union ministry for labour and employment, led by Bhupender Yadav.
While thanking the finance ministry for responding to his concerns, Mr Pai further asked: "But can you explain why the interest credit is very delayed every year? EPFO accounts are fully electronic! Why cannot interest be credited within 30 days after year end."
Not willing to relent, he continued asking further questions while tagging the PM and the FM among other handles, “How is payment done to a subscriber retiring in May if interest is not credited for March end? Paid later?”
Government as well as private sector employees are allowed to make voluntary contributions over and above the statutory deductions into the GPF (general provident fund) or EPF, respectively. EPF accounts are mandatory for employees earning up to ₹15,000 a month in firms with over 20 workers, with 12% of the basic pay and dearness allowance deducted as employees’ contribution and another 12% remitted by the employer.
As of March 2020, EPFO had 247.7mn (million) members, of which 143.6mn members had been allotted Unique Account Numbers and about 50mn were active contributors during 2019-20.
Citing a misuse of the tax exemptions on PF incomes, Ms Sitharaman had said that all income on PF contributions over Rs2.5 lakh per year will be taxable from 2021-22.
The Rs2.5 lakh annual contribution limit applies for EPF members, while in GPF or other PFs where there is no contribution from the employer, the tax-free threshold has been set at Rs5 lakh.
In September 2021, the income-tax (I-T) department introduced rules asking for all PF accounts to be split into two: one with taxable contributions and interest earned thereon, and another with the non-taxable contribution, which included the closing balance of the PF account as on 31 March 2021, and all fresh non-taxable contributions and interest thereon.
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