PF rate lowered to 8.65%, loyalty benefits added and bonus on retirement

EPF interest rate for FY17 to be lower than that provided for FY16

The provident Fund rate for 2016-17 has been reduced to 8.65 per cent from 8.8 per cent in 2015-2016. Secondly, loyalty-cum-life benefit would be provided to all subscribers who have contributed to the scheme for 20 years or more on retirement.

Here are the important announcements regarding EPF

1) Interest on EPF for FY17 cut: Employees' Provident Fund Organisation (EPFO) subscribers, will get 8.65 per cent interest on provident fund deposits for 2016-17, as decided by the organisation's trustees in December, Labour Minister Bandaru Dattatreya said on Thursday. The decision, however, is yet to be approved by the government.

The Finance Ministry had last year also decided to lower the EPF interest rate of 8.8 per cent for 2015-16 decided by the EPFO's Central Board of Trustees (CBT), to 8.7 per cent. The decision had drawn flak from all corners forcing the government to uphold 8.8 per cent. (Read more) 

2) Loyalty-cum-life benefit suggested: The other important announcement was that EPFO's subscribers would get loyalty-cum-life benefit of up to Rs 50,000 at the time of retirement for contributing to the scheme for 20 years or more. 

According to the CBT, the suggested benefits will be provided on a pilot basis for two years under Employees' Deposit Linked Insurance (EDLI) scheme, after which it will be reviewed.  The benefit would also be provided in case of permanent disability even if the member has contributed for less than 20 years. 

Those members whose average basic wages are up to Rs 5,000 will get loyalty-cum-life benefit of Rs 30,000. Similarly, the members with wages of Rs 5,001-10,000 will be eligible for Rs 40,000 benefit. All those members getting more than Rs 10,000 monthly wage will be eligible for Rs 50,000 loyalty-cum-life benefit under the proposed scheme. (Read more) 

3) Minimum assured sum in event of death suggested: The CBT has also recommended a minimum sum assured of Rs 2.5 lakh in the event of death of a subscriber. 

"The CBT has recommended amending the Employees' Deposit Linked Insurance Scheme (EDLI) to provide for the minimum benefit of Rs 2.5 lakh and loyalty-cum-life benefit of up to Rs 50,000 at a meeting held yesterday," a senior official said. This benefit too will be provided on a pilot basis for two years, after which it will be reviewed. 

At present, the dependants of the deceased get a sum assured of up to Rs 6 lakh. There is no provision of minimum insurance and any benefit for surviving members or in cases of permanent disability under the scheme. (Read more)