For Financial Year 2015-16 from 8.75% last year Employees Provident Fund Organization (EPFO) has raised interest rate on Provident Fund to 8.80%.In case of exempted trusts i.e. trusts run by companies who manage their own PF corpus under EPFO guidelines, the increased rate shall also apply.
Companies who manage their own PF corpus are required to measure and recognize in their books of accounts a liability in respect of interest rate guarantee i.e. a liability in respect of the requirement to honour interest rate declared by EPFO irrespective of the actual earnings of the its own fund.
The above marginal increase in the PF rate is likely to result in an increase in Interest Rate Guarantee Liability by between 2% to 8% (depending upon certain factors).