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EPF Interest Rate Falls Again & This Time It Came Down To 8.55%

Interest rates of EPF (Employees’ Provident Fund) keep on falling. Two years back, EPFO (Employees’ Provident Fund Organizations) paid 8.8% on EPF balances. And now the Central Board of Trustees (CBT) of the EPFO is putting forward a reduction of interest rate on PF balances to 8.55% for 2017 – 18 as compared to 8.65% the year before.

In defiance of the falling rates of EPF, it still holds saving advantages over other retirement savings fund.

In respect to the matter, CEO and founder of Clearfunds.com said that

it is backed by Government of India, and secondly, while the rates may vary each year, they generally move around a small band. Importantly, EPF is tax – free during the period interest is earned as well as at the time of withdrawal”.

Benefits of Investing in EPF

EPF comes with a lot of advantages which are as follows:

  • In EPF, interest earned on funds is tax – free
  • Investing in EPF guarantees savings as one cannot withdraw from its account easily. And in retirement, that saved money can be used for financial security. Or the funds can also be used at the time of the emergencies in life
  • If an employee is planning a long – term investment, this scheme is just for them
  • In times of need, especially in certain cases such as marriage, medical, housing, education, EPF funds can provide an employee much needed liquidity
  • EPF can also be transferred from one company to the other through UAN (Universal Account Number) if you changes your job

Difference Between EPF & PPF

EPF (Employees’ Provident Fund) and PPF (Public Provident Fund) are both long term investment schemes. However, both are different schemes which are as follows:

EPF PPF
Lock – in – Period There is no lock – in – period The maturity period of PPF is after 15 years and one can extend up to 5 more years
Tax Implication EPF qualifies under 80 C of Income Tax Act PPF qualifies under U / s 80 C. However, on maturity there is no tax
Interest Rates 8.65 % two years back. And new suggested interest rate is 8.55 % The interest rate for now is 8.7 per cent
Loan Option The account holders can avail loans only for conditions applied by the authority Account holders can apply for loans up to 50 per cent of the balance of the 4th year from 6th year onwards
Withdrawal Facility An individual having an amount can withdraw amount for personal needs providing necessary documents Individuals cannot withdraw money till the completion of tenure

Rate Comparisons Between EPF Vs Other Retirement Savings Scheme

Instruments Interest Rate of 2017 – 18 (in %)*
Savings Deposit (SD) 4
5 Year Time Deposits (TD) 7.4
5 Year Recurring Deposit (RD) 7.1
5 Year Monthly Income Schemes (MIS) 7.3
5 Year National Savings Certificate (NSC) 7.6
Public Provident Fund (PPF) Scheme 7.6
Employees Provident Fund 8.55

 

*2017 – 18 Q4 Rates / as per latest announcement


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