Skip to main content

EPFO may Give Part Payout in MF-Like Units

EPFO may Give Part Payout in MF-Like Units
Dividend on equity investments may also be distributed among its 45 million subscribers
Subscribers to the Employees' Provident Fund Organisation (EPFO) may soon get part of their retirement payout in the form of units proportionate to the money the state-run pension fund invests in equities, a senior official said. EPFO invests up to 15% of its annual incremental corpus -pegged at ` . 1.4 lakh crore -in stocks through exchange-traded funds (ETFs) to take advantage of higher returns from equities. The rest of the money is invested in government securities and other forms of debt.
However, on retirement, the subscriber gets a consolidated sum based on interest rate decided by the EPFO's central board of trustees (CBT). If the proposal cited above is adopted, then part of this payout will be in the form of units, similar to that of a mutual fund, that can be encashed at time of exit. This would also mean that the dividend earned by EPFO annually on its equity investment will be distributed among its 45 million subscribers, thus fetching them higher returns.
The return on equity investment isn't factored in while calculating the interest rate declared every year nor is it reflected in the PF statement. The cumulative return on EPFO's investment in equity was 13.72% until May in the two years since it began putting money in ETFs. EPFO declared an interest rate payout of 8.75% in FY15, 8.8% in FY16 and 8.65% in FY17.The labour ministry is finalising the unitisation policy, said the official cited above.
“The policy has been discussed with stakeholders and we hope the central board of trustees will approve of it when it meets later this month,“ the official added.If this proposal is implemented, subscribers can check the status of their PF in terms of investment in debt and equity-based units allotted to them. A subscriber may also be allowed to delay encashment of the units at the time of exit.
“Once a subscriber decides to withdraw their PF, 85% of total investment is paid back along with the rate of interest declared while their 15% of total investment made in equity is paid back by multiply ing the units accumulated with the value of equity on that particular day,“ said the official cited above.“The subscriber would also have an option to defer the withdrawal of equity investment by one to two years, depending on the tenure finalised by CBT, if he thinks the same can fetch better returns later.“ PF withdrawals are tax free.
EPFO has been raising the amount it invests in equities since 2015, when it started with 5% of the corpus. Its investment in FY16 was Rs 6,577 crore, rising to Rs 14,982 crore or 10% of its corpus in the following year. This year the investment limit has been raised to 15%, which translates into about Rs 20,000 crore being invested in ETFs.
The investment in equity has been opposed by trade unions on the grounds that returns are not assured and that, in the absence of any selloff policy, the returns remain on paper and do not bring monetary benefits. The proposal under consideration should counter that argument, the official said
The Economic Times, New Delhi, 5th October 2017


Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Deposit gush:-CA Institute Bats for Special Audit

Obligation for the Month of April

Event DateActApplicable FormObligation07/04/2017Income TaxForm No.27C (TCS)Submission of Forms received in Mar  to IT Commissioner10/04/2017ExciseER-1Excise Return ER-1 for Non SSI assessees for Mar10/04/2017ExciseER-2Excise Return ER-2 for EOUs for Mar10/04/2017ExciseER-3Submission of Excise Return ER-3 by SSI units for Mar quarter10/04/2017ExciseER-6Excise Return ER-6 by units paying duty >  1 crore (CENVAT + PLA) for Mar12/04/2017D-VATBE - 2Advance information for 2nd fortnight of APR of functions with booking cost > Rs 1 lakh in Banquet Halls,hotels etc. in Delhi15/04/2017Income TaxForm 15CCStatement by Banks etc. in respect of foreign remittances during the quarter15/04/2017D-VATDVAT-20Payment of DVAT TDS for Mar15/04/2017Providend FundElectronic Challan cum Return (ECR)E-Payment of PF for Mar21/04/2017ESIESI ChallanPayment of ESI of Mar (Applicable for Salary upto Rs. 21,000 instead of 15,000 earlier)21/04/2017M-VATMVAT ChallanPayment of MVAT & WCT TDS for Mar21/04/201…