The Employee’s Provident Fund Organisation (EPFO) has increased the interest rate for the employee’s Provident fund to 8.15% for 2022-2023.
This marks a change from March 2022, when EPFO reduced the rate to 8.1%, which was the lowest in the last 40 years.
We have observed that there is an air of festivity and celebration in the Salaried community owing to an increase in EPF rate. But don’t rejoice so soon. This should only increase your happiness points in proportion to your salary amount.
Let me give you a gist, and shed some light.
Let us assume that your gross monthly salary is Rs 1 Lakh; so, your basic salary is Rs 50,000/month, (usually basic salary is 50% of your gross salary)
The maximum limit to EPF contribution is 12% of your gross salary.
It means a total contribution of Rs 12,000 maximum by employee and employer combined.
Therefore, yearly we are looking at Rs 1.44 lakh per annum in EPF contribution.
With the current hike of 0.05% from the previous year 8.1% will give you a net earning of Rs 72, which does not seem like a huge hike given the salary you are earning.
We do not want to dim your smile, but this is the reality, based on simple maths. The decision to increase the EPF interest rates will impact nearly 6 crores active EPFO subscribers, including 72.73 lakh pensioners in FY22.
EPFO has a surplus of Rs 663.91 crores, higher than the previous year, that will guarantee increased income for the members.
Although an increase in interest rates, the difference of 0.05% might not be as impactful as the air of celebration has made you believe.
EPFO focuses on the safety and preservation of its values while also considering safety and growth in its investment approach. Recently, EPFO announced that eligible members can apply for higher pensions through the unified members’ portal until May 3, 2023, along with their employers.
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