Retirement fund body EPFO on Thursday decided to retain 8.5 percent rate of interest on provident fund deposits for the current financial year. 

The Employees’ Provident Fund Organisation’s (EPFO) apex decision-making body Central Board of Trustees decided to fix an 8.5 percent rate of interest for 2020-21 at its meeting in Srinagar on Thursday, sources said. EPFO has more than five crore active subscribers.

The decision comes amidst speculations that the retirement fund body would lower interest rates for the current fiscal as economic downfall due to the coronavirus pandemic led to a large number of withdrawals.

“People must appreciate that the government has maintained the rate of interest for 2020-21 despite a huge economic downturn due to COVID-19,” Virjesh Upadhyay, EPFO Board Member and General Secretary of Bharatiya Mazdoor Sangh told. Last year, in March, EPFO had reduced the interest rate on provident fund deposits to a seven-year low of 8.5 percent for 2019-20. For the financial year 2018-19, the interest rate was fixed at 8.65 percent. The EPFO had provided an 8.55 percent interest rate to its subscribers for 2017-18 and an interest rate was 8.65 percent for the financial year 2016-17.

In Budget 2021, Finance Minister Nirmala Sitharaman had announced that the depositors investing more than Rs 2.5 lakh in EPF in a year would have the interest liable for tax from April 1.

“In order to rationalize tax exemption for the income earned by high-income employees, it is proposed to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of Rs 2.5 lakh. This restriction shall be applicable only for the contribution made on or after 01.04.2021,” Sitharaman said in the budget speech.