Indian Employees Provident Fund (EPF) scheme is set to become more lucrative with new changes for its members with CBT approving a key amendment to Rule 60(2)(b) of the EPF Scheme, 1952.
This new change will ensure that interest on the accumulated EPF balance and paid up to the date of final claim settlement to retirees.
Key Highlights of the Amendment
- Interest Until Final Settlement:
- Previously, interest was paid only up to the end of the preceding month in which claims were settled, causing members to lose out on additional earnings.
- Under the new rule, EPF interest rates will accrue until the final withdrawal date, even if claims are processed after the 24th of a month.
- Substantial Financial Gains:
- For instance, a member retiring with ₹1 crore and withdrawing on the 20th of a month will now receive an additional ₹44,355 in interest for 20 days (calculated at an EPF interest rate of 8.25% for FY25).
- Like this, a member with Rs one crore will earn an additional Rs.44355 in interest for the same period.
- Claims Accepted throughout the Month:
- The amendment also allows claims to be processed any day of the month, reducing delays and ensuring timely disbursement.
Impact on Members
This change is especially beneficial for retirees who withdraw EPF corpus upon attaining 55 years or due to disability or unemployment. Members can now maximize their returns without worrying about losing interest due to procedural delays.
Tax Implications
While interest earned on EPF balances is taxable at marginal rates after retirement (if no fresh contributions are made), this amendment ensures that members continue to benefit from compounding until their final settlement.
Inoperative Accounts
Post-retirement, if no contributions are made for three years, EPF accounts become inoperative and cease earning interest. However, under certain conditions (such as fresh contributions), these accounts can remain active.
EPS and VPF Contributions
- Contributions to the Employees’ Pension Scheme (EPS) and Voluntary Provident Fund (VPF) remain unchanged.
- EPS offers pension benefits based on contributions and years of service, while VPF allows employees to voluntarily contribute beyond statutory limits for tax-free returns.
A Step Towards EPFO Member Welfare
This amendment reflects the government’s commitment to enhancing financial security for retirees.
By ensuring interest accrual until final settlement and streamlining claim processing throughout the month, EPFO members can now enjoy better returns on their lifelong savings.
With these changes poised to take effect after Gazette notification, members can look forward to a more rewarding retirement experience.