I worked for a company for 14 years and had been contributing to the Employees’ Provident Fund (EPF) for more than 20 years. I lost my job in 2016-17 due to cost cutting. My last PF was deducted in May 2016. Will my account become inoperative after three years if no PF transaction is done? I have received interest on my PF account till March 2018 only. Will I continue to earn interest on my EPF till it gets inoperative?
If you have left employment and have not joined any new organization for employment, the PF account due to non-operation will become an inoperative account. This happens when there is no fresh contribution in the account for a continuous period of 36 months, after which it is classified as a dormant PF account.
All PF accounts were earning interest whether active or dormant earlier. Restrictions were imposed on dormant accounts with effect from April 2011. And from the said date, the accrual of interest was stopped for all the dormant accounts. This was done primarily to help EPFO save interest payouts on non-operative accounts. However, the decision was reversed and the restriction was lifted from April 2016, thereby enabling dormant accounts to earn interest till the account holder attains retirement age.
So in case you continue the with inoperative account, make sure that the account is fully KYC-compliant and ensure that the UAN (Universal Account Number) has been allotted to you for ease of dealing with the PF authority going forward.
Also, you should be aware that on the interest accrued after leaving employment, the exemption will be limited to the accumulated balance due and payable to an employee up to the date of his retirement or end of his employment, implying that the interest earned post retirement or after leaving employment will be considered as taxable.
Surya Bhatia is managing partner of Asset Managers. Queries and views at firstname.lastname@example.org