EPFO reduces PF interest rates: 8.1% interest will be available on Provident Fund in 2021-22, this is the lowest in the last 40 years

There is bad news for about 6 crore employees of the country coming under the purview of PF. The Employees’ Provident Fund Organization (EPFO) has decided to cut the interest rate for the financial year 2021-22. That is, now you will get interest at the rate of 8.10% instead of 8.5% on the amount deposited in the PF account. This rate is the lowest in the last 40 years. In 1977-78, the EPFO ​​had given an interest of 8%. Since then it has been 8.25% or more. Talking about the last two financial years (2019-20 and 2020-21), the interest rate has been 8.50%.

Understand here how little interest will be available on PF now
Under the EPFO ​​Act, 12% of the basic salary plus DA to the employee goes to the PF account. So at the same time, the company also contributes 12% of the basic salary plus DA of the employee. Out of the 12% contribution of the company, 3.67% goes to the PF account of the employee and the remaining 8.33% goes to the employee pension scheme.

In such a situation, suppose a total of Rs 5 lakh is deposited in your PF account till March 31, 2022 (opening balance for the financial year 2022-23). In such a situation, if you had got interest at the rate of 8.50%, then you would have got Rs 4,2500 as interest on 5 lakhs. But now after reducing the interest rate to 8.10%, you will get an interest of Rs 40,500. However, this example has been done roughly.

3% interest on PF was started in 1952
In 1952, the interest rate on PF was only 3%. However, after that it increased. For the first time in 1972 it reached above 6%. It reached above 10% for the first time in 1984. The best time for PF holders was from 1989 to 1999. During this, 12% interest was available on PF. After that the interest rate started falling. The interest rate never reached close to 10% after 1999. It has remained below 9.50% since 2001. It has been 8.50% or less for the last seven years.

Highest 12% interest till date
Talking about the last two financial years (2019-20 and 2020-21), the interest rate has been from 8.50%. It has been 8.65% in 2018-19. On the other hand, if we talk about the highest interest till now, then it has been in the financial year 1989-2000. PF was started in 1952. From 1952 to 1955 there has been an interest of 3%.

Interest rate is decided at the end of the financial year
Finance Investment and Audit Committee meets first for the decision of interest rate in PF. It gives an account of the money accumulated in this financial year. After this the CBT meeting takes place. After the decision of the CBT, the interest rate is applied after the consent of the Ministry of Finance. The interest rate is decided at the end of the financial year.