Do EPF members suffer a loss if EPFO delays interest payments? Know the Steps of Withdrawal when Interest Credit pending

The Employees’ Provident Fund Organisation (EPFO) normally announces the yearly interest rate in the fourth quarter of the financial year. Following in the tradition of previous years, the EPFO announced the new rate for deposits held during the financial year 2023-24 in February of this year, with a small increase to 8.25%.

However, based on prior years’ trends, it is unlikely that this interest will be credited anytime soon, particularly before the conclusion of the financial year on March 31, 2024.

Following the announcement of the interest rate for the financial year, the proposal is sent to the finance minister for approval. The Labour Ministry then notifies the interest rate, and the procedure of crediting interest to accounts begins. The delay is attributed to the labour ministry’s failure to transmit necessary documentation to the finance ministry, as well as typical red tape and paperwork issues.

If interest is credited on time in other deposits, such as bank FDs, it is added to the principal and the account begins to earn more interest. For example, if the interest rate is 10%, a Rs.100 deposit yields Rs.10 each year. If it is credited, the new principal becomes Rs.110, and it will earn extra interest, which will be Rs.11 the following year at the same rate. As a result, any delay in crediting interest may result in a loss of opportunity to earn interest.

Doesn’t this delay in interest credit have an influence on the amount of interest that EPF subscribers would have earned on EPF balances in the current financial year if the interest had been credited into their EPF account at the end of the previous year?

Many worried members have raised the issue of delay with the EPFO, and the provident fund organization has repeatedly assured subscribers that there will be no loss of income in the event of delay.

The EPFO has said that any credited interest will be accumulated and paid in full, ensuring no loss of interest.

To understand why a delay in interest payment does not result in a loss of interest earnings for EPF subscribers, we must first understand the accounting method used by EPFO to calculate earned interest in the new year when it credits the past year’s due interest after many months.

What happens when an EPF member withdraws funds before interest is credited

EPF can be withdrawn in part or in full. When a person retires or is out of work for more than two months, he or she may withdraw completely. However, partial withdrawal is permitted under certain conditions, as stated in the policy. EPFO has confirmed that there will be no loss of interest because the interest was calculated in accordance with policy.