InvestorQ : What is the latest interest rate on provident funds announced by the government for EPFO deposits for the financial year 2021-22?
Lavanya Subramanian made post

What is the latest interest rate on provident funds announced by the government for EPFO deposits for the financial year 2021-22?

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Anamika Sodhani answered.
2 months ago
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For the FY22, the government has announced 8.1% as the interest rate payable on Employees Provident Fund Office (EPFO) deposits. This is 40 bps lower than the 8.5% paid by the government on EPFO deposits in the previous year. However, it must be noted that the interest rates on EPFO did not fall at the same pace as other debt instruments despite the additional tax benefits available.

Experts are of the view that at 8.1%, the rate of interest is still very attractive. Firstly, the investment entails a tax exemption under Section 80C of the Income Tax Act. In addition, the interest paid on the employee contribution and the employer contribution is fully tax-free up to 12%. If you add these up, the effective return on EPFO is well above 13%, which is an extremely attractive return on a risk-free government of India deposit.

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