EPFO: To stimulate the sluggish Indian economy, the Government of India has consistently introduced a range of benefits for the middle class, both during and following the budget announcement. A series of declarations and commitments are being made in quick succession. The overarching aim of these initiatives is to generate market demand by enhancing cash flow among the populace and promoting consumption, thereby invigorating the market.
Tax-free income up to Rs. 12.75 lakh
In conjunction with the announcement of tax-free income up to Rs. 12.75 lakh in the budget, the Government of India may also consider raising the interest rate on Provident Fund (PF) deposits. This decision could be made during the upcoming meeting of the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) scheduled for February 28, which will be presided over by the Union Labor Minister, with representatives from Employer Associations and Trade Unions in attendance.
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Enhancement of market demand
The Indian government is currently prioritizing the enhancement of market demand and is implementing various strategies to achieve this goal. Consequently, it is crucial for the government to demonstrate to the public that they are earning additional income from alternative sources after making income up to Rs. 12 lakh tax-free, thereby encouraging increased domestic consumption.
Increase in PF interest rate?
As a result, there is a possibility that the interest rate on PF may be raised for the fiscal year 2024-25. The Government of India has previously undertaken similar actions in the last two years, raising the PF interest rate to 8.15 percent in 2022-23 and to 8.25 percent in 2023-24. Given the current base rates of banks, it appears feasible that the interest rates on PF could be increased, albeit modestly.