New Delhi, Feb 8 (PTI) Refuting Finance Ministry''s claim,Labour Ministry has justified EPFO''s declaring 9.5 per centinterest for 2010-11, saying the surplus of Rs 1,731.57 crorewith the provident fund manager is real and not an accountingflaw.
The Finance Ministry had questioned the increase in therate of interest to 9.5 per cent on PF deposits for thecurrent fiscal, stating the EPFO had no real surplus.
It said the surplus shown by the EPFO arose because allsubscribers'' accounts were not updated.
The Finance Ministry has notified income tax exemptiononly upto 8.5 per cent interest, which the Employees''Provident Fund Organisation (EPFO) has been giving since2005-06 on this rate of return.
In a recent letter of January 29, the Labour Ministry hasargued the EPFO is not asking for any government support forthe extra returns to the salaried workers. It is their moneywhich has earned returns.
The Finance Ministry''s objections were based on aComptroller and Auditor General (CAG) report which suggestedthat there was no surplus with the EFFO''s interest suspenseaccount.
CAG argued that Rs 1,731 crore was shown as extra amountbecause of not updating 4.72 crore members'' accounts.
In its counter-argument, the Labour Ministry said thatthe EPFO has kept a provision for the extra payment ofinterest - irrespective of whether accounts are updated ornot.
Employees'' Provident Fund Organisation''s apex decisionmaking body Central Board of Trustees (CBT) headed by theLabour Minister had announced 9.5 per cent rate of returnafter it found a surplus of Rs 1731.57 crore in its InterestSuspense Account.
Finance Ministry has to give concurrence to the rate ofreturn decided by CBT and notify allowing tax exemption onentire such earnings on PF deposits.
Finance Ministry had also claimed that EPFO''s incomeis taken on ''actual receipt basis'' while the liability wastaken on ''accrual basis on some assumptions''.
Dismissing this, Labour Ministry said the incomeand liability both have been taken on actual receipt (corpus)of the EPFO based on balance sheets of past since 1952-53.
The ministry said that since the calculation has beendone at macro level on the total credits of all the individualaccounts, it does not make any difference whether the accountsare actually updated or not.