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Ahead of protests, Finance Ministry defends lower EPF rate, cites lack of funds

In advance of a one-day protest referred to as through labour unions towards lowering of interest price on EPF, Finance Ministry on Wednesday defended its decision, saying ultimate 12 months’s surplus might should be used to pay even the decrease…

In advance of a one-day protest referred to as through labour unions towards lowering of interest price on EPF, Finance Ministry on Wednesday defended its decision, saying ultimate 12 months’s surplus might should be used to pay even the decrease eight.7% price on employee Provident Fund for 2015-16.

Employee unions have called a national protest on April 29, in opposition to the Finance Ministry’s move to repair EPF interest price at eight.7% for 2015-16, decrease than 8.8% sought by means of employee Provident Fund agency (EPFO) and eight.75 paid for the previous fiscal.
A Finance Ministry supply stated income of EPFO in 2015-16 is “now not even sufficient to pay eight.7% hobby fee.” “There was a surplus of Rs 1,604.05 crore for 2014-15. On the proposed rate of 8.eight%, this surplus would be decreased to just Rs 673.85 crore in 2015-16.

“For that reason, the proposed charge of 8.8 in step with cent seeks to draw on surplus of closing 12 months. This would adversely hit protection of fantastically stable returns to traders for the following yr in a falling hobby charge scenario,” the source added.

Mentioning that income of EPFO in 2015-16 were now not even sufficient to pay eight.7% interest, the source stated the ratified interest fee of eight.7% would go away a surplus of around Rs 1,000 crore with EPFO for the yr.

“This is nevertheless lower than the surplus of Rs 1,604.05 crore for 2014-15,” he stated.

At the same time as the Labour Ministry is planning to are searching for a review of Finance Ministry selection, exchange unions, together with RSS-backed Bharatiya Mazdoor Sangh have attacked the authorities for decreasing of the price.

Explaining the method, the source stated hobby fee on EPF accumulations is administered by using the Labour Ministry on the tips of imperative Board of Trustees (CBT) of EPF.

“Ministry of Finance ratifies the prices on the premise of proposal from Labour Ministry, thinking of financial sustainability and ensuring stable returns to the buyers,” the supply stated.

“Movement of Ministry of Finance is based on natural arithmetic calculation and is in the interest of all the members of EPFO and sustainability.”

The Finance Ministry source stated the interest earnings earned on 9 crore inoperative accounts, having a main of greater than Rs 35,000 crore, isn’t always dispensed amongst them but as a substitute distributed amongst current energetic account holders primarily based on a CBT selection.

“Furthermore, this windfall for exiting operative accounts will not be to be had from subsequent year on account that CBT in its recent meeting has taken a choice to pay interest for the inoperative bills which it stopped in view that April 1, 2011.

“From in which might these account holders be compensated for past years whilst the hobby incomes on their investment has been used by current active account holders?” he asked.
Also, as on March 31, around three lakh accounts are pending for updation, within the absence of which, it’s far tough to calculate the precise liabilities closer to them.

“The income of EPFO in 2015-16 itself are an end result of investment remodeled some of the years. It definitely implies that outgoing employees may have benefited from the investments made once they had been no longer the members. A decent reserve/surplus amount is vital to ensure inter- generational equity,” the supply brought.

Labour Minister Bandaru Dattatreya had on Monday instructed Lok Sabha that Finance Ministry accepted an 8.7% interest rate for over 5 crore subscribers of the personnel’ Provident Fund agency (EPFO).

“The (EPFO’s apex choice-making frame) CBT at its meeting held in February had proposed an intervening time rate of interest at 8.eight% to be credited to the accounts of EPF subscribers for 2015-16. The Finance Ministry has, but, ratified a hobby charge of eight.7%,” the minister had said.

This is probably the first time while Finance Ministry has not given concurrence to the interest rate on EPF as decided through the CBT, that is headed through the labour minister.

The brand new pass comes at the heels of government withdrawing proposals pertaining to EPF. Buckling underneath strain, it rolled back its move to tax EPF as well as tighten withdrawal norms.

 

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The EPFO had provided eight.75% rate of hobby in 2013-14 and 2014-15, which became higher than 8.five% in 2012-thirteen and eight.25% in 2011-12.

Its estimates, worked out in September, projected that the frame can easily pay eight.95% price of hobby as it would go away a surplus of Rs a hundred crore.

The EPFO pays rate of return to subscribers on the idea of returns it generates from its investments.

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