The impact of COVID-19 on salaried employees is visible in the latest data by EPFO (Employees' Provident Fund Organisation). The retirement body closed as many as 71,01,929 accounts between April and December 2020 compared to 66,66,563 during the same period in 2019.
The total withdrawal from EPF account stood at Rs 73,498 crore between April and December 2020 compared to Rs 55,125 crore during the same period last year.
The highest number of accounts were closed in October (11,18,751), followed by September (11,18,517).
The data came from the Ministry Of Labour And Employment in response to a question by a Parliament member.
Notably, Finance Minister Nirmala Sitharaman had offered some tax relief on EPF withdrawals in the wake of COVID-19 in March 2020. An EPF member could have withdrawn up to three months' basic and dearness allowance or 75 per cent of the balance in the account, whichever is lower, to meet financial exigencies post-COVID.
In a separate reply to the Parliament, Minister of Labour and Employment Santosh Kumar Gangwar further informed that there has been an increase in investment in EPF over the last few years. Total investments made in EPF stood at Rs 1.68 lakh crore in 2019-20 compared to Rs 1.41 lakh crore in 2018-19 and Rs 1.26 lakh crore in 2017-18.
Earlier this month, the EPFO retained EPF interest rate at 8.5 per cent rate for 2020-21 even as the interest rate on small savings schemes and fixed deposits is declining. EPF interest rate is among the highest tax-free sovereign rates in the world. It stood at 8.65 per cent in FY19. The Reserve Bank of India, meanwhile, has reduced repo rate by 2.5 per cent to 4 per cent since January 2019.
The higher interest rate on EPF prompts employees to put higher corpus in EPF, which in turn makes it difficult for the government to pay interest on the same. In this regard, the government has now made the EPF interest income taxable. From FY22, if the total employee PF contribution (mandatory + voluntary) contribution goes beyond Rs 2.5 lakh in a year, the interest earned on the excess amount will be taxable as per the slab rate.