Home / Money / Personal Finance /  PF account earns interest even when you quit working

I retired at the age of 65. Now there is no contribution being made to my EPF account. Will my account continue to get interest as declared from time to time?

—R.K. Gupta

Employees typically rely on PF to build their retirement corpus. With years of contribution by the employer and the employee and the interest addition, the benefit of compounding also works in favour of the investor, resulting in a sizeable corpus. The tax-free status also makes PF an attractive investment option, making an investor wanting to continue for long.

The PF account continues to earn interest, whether or not you are in an employment. In case of retirement and where the PF corpus is not withdrawn, post three years, the account becomes inoperative and no interest is paid. The interest earned on the account may become taxable in case there is no fresh contribution to the account based on recent judicial developments.

The Employees’ Provident Fund (EPF) is taxable if withdrawn before the completion of five years of continuous service. I have been working from January 2012, but in November 2015, I left the job and rejoined another firm after two months. So there was a gap of two months during which I made no contribution towards PF. Will the above be counted as continuous service of five years?

Jitendra Gupta

If EPF is withdrawn before completion of five years of subscription i.e. continuous service of five years, tax deduction at source (TDS) will be applicable and such withdrawal will become taxable under the Income Tax Act. However, there are exceptions under which the period of five years is exempted i.e. the service is terminated by reason of the employee’s ill health or discontinuance of the employer’s business or reasons beyond the control of the employee. In such instances, the withdrawal will be exempt from tax. Likewise, if the employee finds another job and the total PF balance is transferred to the new PF account maintained by the new employer, it will be considered to be continuous service. However, there should be no gap in contribution to PF to avail the continuous service clause. As you joined the new employer after two months, there is a gap in continuous service and, hence, tax is applicable.

If the PF is withdrawn before five years of continuous service, it will be taxable in the hands of the individual—the employer’s contribution along with the interest accrued is taxable as “income from salary". The employee’s own contribution is exempt from tax (to the extent not claimed as a deduction) and the interest accrued on the employee’s contribution will be taxable as “income from other sources".

Surya Bhatia is managing partner of Asset Managers. Queries and views at

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