What has changed in EPF?

By Morningstar |  11-09-20 | 

Employees Provident Fund Organisation, EPFO

As interest rates in the economy have lowered, so has the return from EPF. It touched a peak in the 1990s, at 12%. It now stands at 8.5%.

The board of trustees of the EPFO have indicated that at this juncture (September 2020) it would credit only 8.15% interest to its subscriber accounts for the financial year 2019-20. They chose to transfer only the income generated out of investments in bonds and other fixed income securities to the subscribers.

They resolved to meet again in December 2020 to decide when to credit the balance 0.35% to the beneficiary accounts.

According to a statement issued by the government, the interest rate of 8.50% would comprise 8.15% from debt income and balance 0.35% (capital gain) from the sale of ETFs subject to their redemption by December 31, 2020. It further recommended to account for such capital gains in the income of the financial year 2019-20 as being an exceptional case.

Employees’ Deposit Linked Insurance, EDLI

This is an insurance cover provided by the EPFO. This benefit is provided in case an employee expires and was a member of the scheme at the time of death. That means, the employee must be an active member of EPFO.

The lumpsum payment in case of the demise of the member during the service period is given to the nominee or beneficiary. If no one is registered, it is given to the legal heir.

The actual cover depends on the salary drawn in the last 12 months of the employment before death.

(The average monthly wages drawn, subject to a maximum of Rs 15,000, multiplied by 30 times, plus 50% of the average balance in the account of the deceased during the preceding 12 months.)

You can access the complete details on the Employees’ Deposit Linked Insurance official website.

According to the regulations, the assurance benefit shall not be less than Rs 2.5 lakh and subject to a maximum of Rs 6 lakh. However, the latter has now been increased to a maximum of Rs 7 lakh.

Also, the benefit will be provided even if he has worked in several firms in the year preceding his death. This benefit was previously not paid if the member worked in more than one establishment during a continuous period of 12 months preceding his death.

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