How EPF rate of interest stacks up in opposition to SBI FD, PPF and different schemes
Earlier this week, Finance Minister Nirmala Sitharaman has defended the proposal to trim the rate of interest paid on staff’ provident fund deposits. She said that it is a choice taken by the EPFO Central Board which has a large spectrum of representatives in it. Also, she defined the comparative prevailing rates of interest of different schemes saying Sukanya Samriddhi Yojana affords 7.6%, Senior Citizen saving scheme (7.4%), and PPF (7.1%), whereas SBI’s 5-10 yr fastened deposits provides 5.50% rates of interest.
The FM said that “Yes, 40 years. There are today’s realities that do keep us in the context of decisions taken by the Central Board of the EPFO.”
It’s Sitharaman-led ministry who’s the nodal authority for approving the advice of the Central Board of EPFO.
Post Office Savings Schemes:
Post Office Time Deposit Account (TD): The scheme provides a 6.7% price on the tenure of 5 years. The lowest price supplied right here is 5.5% on 1-3 years tenure. Its curiosity is payable yearly however calculated quarterly. The account might be opened with a minimal of ₹1000 and in multiples of ₹100. No most restrict for funding.
Post Office Monthly Income Scheme Account (MIS): Being one of many PO small financial savings schemes, it affords 6.6 % each year payable month-to-month. Minimum month-to-month funding right here can start from ₹1,000 however might be prolonged to a most of ₹4.5 lakh in a single account and ₹9 lakh in a joint account.
Senior Citizen Savings Scheme (SCSS): This scheme is supposed for senior residents above 60 years of age. The scheme affords a 7.4% rate of interest and is payable on thirty first March, thirtieth June, thirtieth Sept, and thirty first December. The minimal funding right here is ₹1,000 and the utmost as much as ₹15 lakh. Investment beneath this scheme qualifies for the advantage of ₹1.5 lakh beneath part 80C of the Income Tax Act, 1961.
Public Provident Fund Account (PPF): PPF is a long-term funding scheme with a tenure of 15 years. Interest earned on this scheme is tax-free beneath the IT Act, whereas deposits high quality for ₹1.5 lakh profit beneath part 80C. A minimal deposit of ₹500 and a most deposit of ₹1.50 lakh is allowed in a monetary yr. A PPF account holder earns a 7.1% price on their investments beneath this account.
Sukanya Samriddhi Accounts (SSA): This scheme is supposed for a woman youngster because it motivates mother and father to start funding at a low quantity and construct funds for the lady kid’s future training or marriage bills. This account might be opened for a most of two ladies in a household. Provided in case of twins/triplets ladies start greater than two accounts might be opened. A minimal funding of ₹250 is allowed and may go as much as a most of ₹1.5 lakh in a monetary yr. The curiosity earned on these accounts is tax-free, whereas the deposits qualify for advantages beneath part 80c of the IT Act. An rate of interest of seven.6% each year is obtainable on this scheme.
Fixed Deposits:
SBI FDs beneath ₹2 crore:
At SBI, a 5.50% rate of interest is obtainable on tenure for five years and as much as 10 years, the speed is 6.3% for senior residents for a similar time period. Meanwhile, within the normal class, 5.45% price is obtainable on 3 years to lower than 5 years, 5.20% on 2 years to lower than 3 years, and 5.10% on 1 yr to lower than 2 years.
For senior residents, the financial institution affords a 5.95% price on 3 years to lower than 5 years, 5.70% on 2 years to lower than 3 years, and 5.60% on 1 yr to lower than 2 years.
HDFC Bank FDs beneath ₹2 crore:
The non-public banker provides 5.60% to the overall class and 6.35% to senior residents on 5 years 1 day – 10 years.
In the overall class, the financial institution provides a 5.45% price on 3 years 1 day- 5 years, 5.20% on 2 years 1 day – 3 years, and 5% on 1 yr 1 day – 2 years. On 1-year tenure, the financial institution additionally provides a 5% rate of interest.
To senior residents, 5.95% is obtainable on 3 years 1 day- 5 years, whereas 5.70% price is relevant on 2 years 1 day – 3 years. As for 1 yr to lower than 2 years, the financial institution provides a 5.5% price.
ICICI Bank FDs beneath ₹2 crore:
Just like HDFC Bank, ICICI Bank additionally affords 5.60% and 6.35% rates of interest to normal and senior residents on 5 years 1 day to 10 years.
The lender additionally has a tax saver fastened deposits the place it provides 5.45% to the overall class and 5.95% to senior residents on a interval of 5 years. The most combination quantity that may be invested within the Tax Saver FD (80C FD) beneath a single PAN is ₹150,000 and the identical can’t be closed prematurely earlier than the expiry of the lock-in interval of 5 years.
The financial institution affords between 5-5.45% charges on tenures from 1 yr to lower than 5 years, whereas senior residents take pleasure in rates of interest starting from 5.5-5.95% on comparable tenures.
With that, it may be mentioned that the EPF rate of interest though is at a four-decade low, but is engaging in comparison with the above-mentioned schemes.
New Income Tax guidelines on EPF curiosity:
Before April 1, 2021, the curiosity on EPF was totally tax-free within the fingers of provident fund contributors nevertheless the federal government modified the foundations in Budget 2021 and now curiosity accrued on EPF contribution past a selected threshold will probably be taxable.
Under the brand new guidelines, any curiosity credited to the provident fund account of an worker shall be tax-free just for contributions as much as 2.50 lakh yearly and any curiosity on an worker’s contribution over 2.50 lakh shall be taxed within the fingers of the worker yr after yr. In case the employer doesn’t contribute to the provident fund of the worker, then the brink relevant will probably be ₹5 lakh of the worker’s contribution, says tax professional Balwant Jain.
It must be famous that the ₹5 lakh restrict covers about 93% of the people who find themselves EPFO subscribers and they’re going to proceed to get assured tax-free curiosity, based on the rate of interest introduced by EPFO yearly. Jain additionally added, “Please note it is the interest on the excess contribution which will become taxable and not the contribution itself. The excess contribution cannot be taxed as the contribution is made by the employee from his salary which already gets taxed.”
Also, each employer and worker contribute 12% every from the worker’s fundamental wage plus dearness allowance. Notably, of the overall employer’s contribution, 8.33% goes to Employees Pension Scheme (EPS) which earns no curiosity.
That mentioned, so far as, the stability standing to the credit score of an worker as of thirty first March 2021 is anxious, curiosity on this non-taxable account will proceed to stay tax-free. However, it is going to be curiosity earned on the second account that will probably be taxable yearly.
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