Employees' Provident Fund Organization on 21st February 2019 has increased the interest rate on Employees' Provident Fund(EPF) to 8.65% for the current financial year(2018-19).
The increase in the EPF interest rate from 8.55% in the financial year(2017-18) expect to benefit six crore subscribers of the Provident Fund Scheme.
All the members of the Central Board of Trustees(CBT) of the EPFO agreed to give a higher interest for subscribers for the current fiscal year.
The proposal would go to the Ministry of Finance for approval.
The interest rate is credited into the subscribers account after the Finance Ministry's approval.
EPF Interest Rate over the last five years
For the financial year 2017-18, the retirement body had kept the interest rate steady at 8.55% -the lowest interest rate recorded in five years.
It had provided interest at the rate of 8.8% to the subscribers' for the financial year 2015-16.
The interest rate stood at 8.5% for the financial year 2012-13 and 8.75% for financial years 2013-14 and 2014-15.
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How Interest Rate hike will impact the Individuals Tax Brackets
Income Bracket Rs.5-Rs 10 Lakh
For individuals in this tax bracket, the effective tax(tax plus cess) rate is 20.8%.
So tax-free return of 8.65% is equivalent to 10.92% with tax in this income bracket.
Rs.10 - Rs.50 Lakh
In this income bracket, individuals taxed at 31.2%(including cess).
So tax-free return of 8.65% is equivalent to 12.57% with tax in this income bracket.
Rs.50 lakh-Rs 1 Crore
In this income bracket, individuals taxed at 34.32% (tax plus cess plus surcharge).
So tax-free return of 8.65% is equivalent to 13.17% with tax in this income bracket.
Income above Rs 1crore
This is the highest income bracket for individuals.
In this segment, individuals taxed at 35.88%(Tax plus cess plus surcharge)
So tax-free return of 8.65% is equivalent to 13.5% with tax in this income bracket.
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