Employees Provident Fund Organization (EPFO) has slashed the return on statutory savings to 8.25% for the current fiscal from 9.5% last year, on cues from finance minister Pranab Mukherjee. A notification for the reduction in rates for 4.72 crore EPFO subscribers was issued earlier this week, and comes days before the general Budget.
In the present structure, the returns will be lower than the 8.6% paid under for public provident fund (PPF) deposits, a popular voluntary savings scheme. Banks too are offering 9%- 9.5% deposits of much shorter duration. But compared to banks, returns on EPF are better since the annual contribution and the interest on the balance are tax free.