People contribute a portion of their monthly paycheque with the hope that the money will earn interest, to be spent for comfortable life post-retirement and to fund that big family wedding. Which is why it’s natural to panic when the interest doesn’t show up on the PF savings account online. After several EPFO members raised an alarm about interest on their investment missing, the Indian Finance Ministry has clarified that it was just a glitched ironically caused by a software upgrade.
Bureaucratic inefficiency in digital India
The interest approved for EPF savings in the FY21 budget was 8.5 per cent, but that was slashed to 8.1 per cent earlier this year. When people saw that the amount wasn’t reflected on their accounts, they wondered where their interest had disappeared. That’s when former Infosys director Mohandas Pai tagged the Prime Minister in his tweet calling out bureaucratic inefficiency.
In response to the tweet, the Finance Ministry clarified that interest is included in payments for EPF, and it wasn’t showing up only because of a software update to calculate a new tax introduced on PF savings in the 2021-22 budget.
An introduction to PF for young professionals
EPF is the 10 per cent to 12 per cent amount that is deducted from monthly salaries, to be saved in an account where it accumulates interest, and can be withdrawn when an employee retires. You can take out 90 per cent of the EPF amount after turning 54, while 75 per cent can be withdrawn once you complete a month of unemployment after leaving a job for a new one. Those who’ve worked for seven years can withdraw EPF corpus for weddings, and those who complete five years get to use it for renovation or construction of a house, while anyone gets access to PF savings in case of a medical emergency.
Interest on EPF has consistently been delayed by months after approval, despite all employees having digitised accounts. Every employee who earns Rs 15,000 in a company with more than 20 people, must have an EPF account. While 12 per cent is taken from salaries as contribution by employee’s, another 12 per cent comes from employers. Since the fund is seen as an investment, employees can also contribute more voluntarily.
There have been instances of Indian companies not contributing to the savings for employees, and recently Spicejet has been accused of defaulting on EPF payments.
