The proposal had met with some resi stance from the finance ministry as it would put pressure on it to raise interest rates on small savings schemes and would not be sustainable go ing forward.
Therefore, the retirement fund body that manages the savings of more than 5 crore organized sector workers is considering a onetime bonus payment.
"We are considering the option of bonus for the first time because this would substantially benefit people in the low income bracket who are otherwise not entitled for an income tax exemption for deductions under PF," a senior government official, who is privy to the proposal
Only those subscribers who have contributed for 12 months in a row would be eligible for the bonus. As per EPFO's internal estimate, around half its subscribers would get bonus this year if the proposal went through with this condition.
"In a way we are introducing differential interest rate for our subscribers under which low income people would get double-digit interest rate for their deposits in the current fiscal (year)," the official said, speaking on the condition of anonymity.
The February 16 meeting of EPFO's Central Board of Trustees it includes representatives of the government, employees and employers would weigh both options (bonus payout and an increase in interest rate) and will make a final decision. To become effective, it will then have to be notified by the finance ministry.
The proposal of differential in terest rate, however, is likely to face stiff opposition from trade unions including RSS-affiliate Bhartiya Mazdoor Sangh.
EPFO provides the interest from the returns on investments it makes, without any assistance from the government. So, workers' representative are of the view that there is no difficulty in providing a higher rate of interest for the current fiscal year.
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