In a double bonanza for the 4.72 crore subscribers of the Employees Provident Fund Organisation, the income tax department has finally provided tax exemption on the 9.5 per cent interest income on PF deposits for 2010-11, even as Union labour minister Mallikarjun Kharge announced that the government would look at hiking the interest rate further on retirement savings further in 2011-12.
We are contemplating further increasing the interest rate on Provident Fund from the present 9.5 per cent. This time also we want to give more to the employees. We are working towards it, he said in Bangalore.
The ministers comments come as a surprise as the EPFO had earlier attributed the 9.5 per cent rate as a one-off incident possible only due to the discovery of a surplus of Rs 1,731 crore in its suspense account. While ruling out a similar rate of interest for 2011-12, the retirement fund manager was trying to find means to keep it higher than the earlier prevailing rate of 8.5 per cent.
We are not sure if we can match the interest rate of 9.5 in 2011-12 or go beyond it as our existing funds and yields may not allow this, sources in the EPFO said when asked to comment on the ministers statement. A move to further increase the interest rate may not go well with the finance ministry which had put strenuous objections to the labour ministrys plan to provide the 1 per cent additional interest rate.