Private sector employees have an annual pastime, speculate on how much interest their provident fund balances will earn. This year, they know it at the beginning of the year itself. They have been given some good news, ahead of the budget. The Central Board of Trustees (CBT) has recommended to the government, to continue with last year’s interest rate. They will get an interest rate of 8.5% on their provident fund balances.
Both employees and employers contribute 12% of their basic salary to a provident fund which is used as a retirement fund. The CBT has recommended this rate to the government, which is likely to accept it. The rate is quite good considering the low interest rate environment, in which bank fixed deposit rates have come down to 6%-8% depending on maturity. The interest on PF is tax free, and adjusted for tax the benefit is much higher.
Read the release here.