The recommended interest rate will be highest return in five years since the 9.5% paid in 2010-11.
The proposal comes at a time when the government and the Reserve Bank of India are looking to reduce deposit rates so that banks can cut lending rates and spur investment.
A higher interest rate on EPF deposits may result in some diversion of funds from bank deposits or small savings schemes as voluntary contributions.
However, finance ministry wanted EPFO to retain 8.75 per cent rate of interest on PF deposits for 2015-16.
The Employees' Provident Fund Organisation (EPFO) has provided 8.75 per cent rate of interest on PF deposits for previous two financial years -- 2013-14 and 2014-15.
EPFO plans to hold a meeting at the earliest for the interest rate proposal to be ratified.