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EPFO Rate At 5-Year Low Of 8.55%. Still Worth Investing?

Adhil Shetty

The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation on Wednesday decided to slash the interest rate for 2017-18 to 8.55% from the earlier 8.65%. Read on to know more.

EPFO Rate At 5-Year Low Of 8.55%. Still Worth Investing?

The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation on Wednesday decided to slash the interest rate for 2017-18 to 8.55% from the earlier 8.65%. With this, the EPF interest rate reduced to a five-year low and will provide 8.55 percent interest on their savings for the current financial year.

The lowering of the rate came as a surprise as media reports had suggested that the retirement fund body will maintain the rate as it had sold a portion of its investments in exchange-traded funds (ETF) worth Rs. 2,886 crores earlier.

We take a look at other schemes to compare the interest rates offered by them.

Employee Provident Fund (EPF)

EPF scheme helps in building a corpus for retirement through regular, monthly, contributions made by employees and their employer. The EPF balance in an employee’s account earns interest. It is amongst the most popular saving scheme for retirement as the amount at maturity and the interest earned are tax-free. The introduction of the Universal Account Number (UAN) has made accessibility of the EPF account easier. This scheme so far was earning interest rate at 8.65 percent, but for the financial year 2017-18, it has been changed to 8.55 percent.

National Saving Certificate(NSC)

These certificates are issued by the post office and can be availed from any branch of postal service. You can buy NSC worth any amount for a maturity period of five years from the date of purchase. The interest rate earned here is based on the type of certificate bought but is calculated on the yearly basis. The interest is tax-free except for the interest earned in the last year. The 5-year NSC attracts an interest rate of 7.6 percent. NSC investments up to Rs. 1.5 lakhs can be claimed as tax deductions under 80C.

Public Provident Fund (PPF)

Investment in this instrument is also popular as the deposits made in this account can be claimed as tax deductions. This was also introduced by the government to promote retirement saving. The PPF account can be opened at any nationalised banks, specific private banks and post offices. You can open a PPF account by investing an amount as small as Rs. 500. And you can invest up to Rs. 1.5 lakhs in a year. This scheme attracts an interest rate of 7.6 percent.

National Pension Scheme (NPS)

This is a low-cost market-linked retirement plan and is mainly aimed at providing benefits to individuals after their retirement. The interest rate for this scheme is not fixed as the money is invested into many investment options, but NPS has helped subscriber earn 12-14%, which is better than other investment options like EPF or PPF. This scheme also gives the subscriber the option to choose where to invest their money in as well as who should manage their investments.

Senior Citizen Savings Scheme

As the name suggests, this scheme is meant for the senior citizens. It can be opened if you are 60 years old. You can make a minimum deposit of Rs. 1,000 in this account and can invest up to Rs. 15 lakhs.  This saving scheme’s maximum tenure is 5 years. But, after maturity, the tenure can be extended for a further 3 years. The five-year Senior Citizens’ Savings Scheme carries an interest rate of 8.30%.

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