The bill to amend payment of gratuity Act in order to double the ceiling of tax-free gratuity to Rs 20 lakh, would soon be placed before the Union Cabinet for approval.
Labour Minister Bandaru Dattatreya on Thursday said that the finance ministry has approved 8.65 per cent interest rate on EPF deposits for 2016-17.
The minister's statement has laid to rest apprehensions among formal sector workers that they would get lower rate of interest than the 8.65 per cent approved by the Employees' Provident Fund Organisation's (EPFO) trustees in December last year.
The ratification of the 8.65 per cent interest on EPF will enable the retirement fund body EPFO to credit this rate of return into the accounts of four crore subscribers.
"Finance ministry has agreed to 8.65 per cent rate of interest. Now, the communication will come. The formal discussions are over," the minister said on the sidelines of National Safety Awards function.
"We will immediately issue the notification and credit the rate of interest to over four crore subscribers," he added.
The minister also said that the bill to amend payment of gratuity Act in order to double the ceiling of tax-free gratuity to Rs 20 lakh, would soon be placed before the Union Cabinet for approval.
The Employees' Provident Fund Organisation trustees had approved 8.65 per cent rate on EPF in December last year.
The finance ministry has been nudging the labour ministry to lower the EPF rate for aligning it with the rates of small savings schemes like PPF.
Earlier, a source had said that in a communication to the labour ministry, the finance ministry has asked the former to provide the rate of interest approved by the EPFO trustees, provided there must not be any deficit to the fund.
Dattatreya has been maintaining that EPFO subscribers be provided 8.65 per cent rate of interest for 2016-17.
"The Central Board of Trustees (CBT) had decided to give 8.65 per cent. We would have surplus of Rs 158 crore (Rs 1.58 billion) on providing 8.65 per cent. I have requested them to approve 8.65 per cent. In any case, this amount (interest income) will be given to workers," Dattatreya had said earlier this month.
As per the practice, the board's decision is concurred by the finance ministry after evaluating whether the EPFO would be able to provide the rate approved by trustees through its own income or not.
Once the finance ministry ratifies the rate of interest approved by the CBT, it is credited into the account of EPFO members for that particular financial year.
The finance ministry had last year decided to lower the EPF interest rate of 8.8 per cent for 2015-16 as approved by the CBT, to 8.7 per cent. The decision drew flak from all quarters forcing the government to uphold 8.8 per cent.
The finance ministry has been asking the labour ministry to rationalise the EPF interest rate in view of lowering of returns on various administered savings schemes like PPF.
The government generally ratifies the rate of return approved by the CBT because the EPFO is an autonomous body and provides interest on EPF deposits from its own income.
Illustration: Uttam Ghosh/Rediff.com