A word of caution: Salaried employees who wish to withdraw their PF contributions and avail the higher rate of interest of 8.75 per cent must wait for the final notification from the finance ministry. For those withdrawing their savings before this, the EPFO will calculate the 8.5 per cent interest rate for the previous fiscal.
In this regard, trade union leaders have sought a higher return on EPFO contributions and may even seek support from the finance ministry that has to finally approve the interest rate and notify it.
“There must be some relief for workers who are suffering from high inflation and they must get a higher interest on their retirement savings,” said AK Padmanbhan, president Confederation of Indian Trade Unions, who is a member of the EPFO’s Central Board of Trustees that recommends the interest rate.
But the EPFO is bound by its norms that do not allow for a higher interest rate to subscribers than the actual income of the fund. “We have estimated an income of Rs 25,048.55 crore for 2013-14. EPFO would require Rs 25,005.41 crore for providing 8.75 per cent rate of interest for this fiscal and leave a surplus of Rs 43.14 crore,” said KK Jalan, central PF commission.
Apart from the PF, investors have other obvious choices such as the recently launched inflation-indexed bonds that promise to give a higher return. Though these bonds are taxable like fixed deposits, but their return would be higher.
The ten-year bonds, offer interest in two parts — the inflation rate and a fixed rate of 1.5 per cent. It has been structured in a manner that even if the inflation goes into negative, investors will continue to get 1.5 per cent which is a fixed rate.
Retail investors, including individuals, Hindu undivided family and charitable institutions can invest a minimum of Rs 5,000 while the investment amount can go up to Rs 5 lakh per investor.
The RBI has also extended issuance of these products to March 31, 2013 from the earlier deadline of December 31, 2013 and is also looking at making it more attractive though this may not happen this fiscal.
The last quarter of the fiscal (January to March) is also when a host of financial institutions such as NHAI, IRFC, National Housing Board and HUDCO start the sale of tax-free bonds. The bonds have a coupon rate of about 8.5 per cent