Retired but haven’t withdrawn your EPF yet? Here’s when the corpus stops earning interest

If you are a salaried employee, you most likely have an EPF account, where a portion of your salary is deposited every month and your employer makes a matching contribution. Over the years, these contributions, along with interest credited by EPFO, can build a substantial retirement corpus.

Because of this, many retirees assume that if the Employees' Provident Fund (EPF) balance is left untouched after retirement, it will continue earning interest indefinitely and keep growing through the power of compounding.

However, that is not the case. EPFO follows a fixed rule on how long interest will be credited and after that period, the amount lying in the account stops earning further interest, even if you have not withdrawn it.

When does your EPF balance stop earning interest?

The Employees' Provident Fund Organisation (EPFO) continues to give you interest even after you stop working or leave your job, until you turn 58, according to the retirement fund body's FAQ section.

However, if you stop working on or after attaining 55 years of age, EPFO will continue to give interest for a maximum period of 3 years. After that, the account becomes inoperative and interest is no longer credited.

In case you retired at the age of 58, but have not withdrawn your EPF savings, then it interest will be continued to be credited for three years after retirement, that is, up to the age of 61, EPFO clarified in a X (formerly Twitter) post earlier.

Although EPFO members are generally advised to withdraw their savings before the account becomes inoperative, this does not mean the money is locked or lost. The balance remains safe with EPFO and can still be claimed later by the member or by nominee in the event of the original account holder's death.

The current EPF interest rate at 8.25% per annum. The employee and employer's mandatory PF contribution is limited to 12% of the statutory wage ceiling of ₹15,000, translating to ₹1,800 per month from each party. Any contribution above this amount must be voluntary.

When is EPF balance withdrawal exempt from tax?

EPF withdrawals are exempt from tax if an employee has completed five years or more of continuous service, meaning if you withdraw your funds after this specified period, then no TDS will be deducted.

This continuous service is not limited to a single employer. If an employee changes jobs and transfers the EPF balance to the new employer instead of withdrawing it, the earlier service period is also counted.

EPF withdrawals before five years of continuous service may also not attract tax if the reason behind the move involves termination from employment due to ill health, closure of the employer's business or other genuine circumstances beyond the employee's control leading to termination.

Other schemes that senior citizens can consider

When you are retired or set to retire in a few years, the first concern for many is maintaining stable savings and a reliable income, especially now that you know your EPF balance will also stop earning interest after a certain period.

Senior citizens, in particular, looking for steady payouts and guaranteed returns can consider fixed income schemes that provide some financial security.

• Senior Citizens Savings Scheme (SCSS): This government-backed retirement plan allows citizens aged 60 and older to invest between ₹1,000 and ₹30 lakh for a period of five years, at an annual interest rate of 8.2%.
• The Post Office Time Deposits: This scheme offers investors fixed, sovereign-backed returns for tenures of 1, 2, 3, or 5 years, with interest rates ranging from 6.9% to 7.5%. They provide safe, predictable and risk-free investments with quarterly compounding.
• Other Post Office Schemes: Investment options such as Savings Account, Monthly Income Scheme (MIS), and National Savings Certificate (NSC), offer safe, government-backed returns of 6.7%–7.4% with capital protection, predictable interest, and tax benefits.

Individuals should note that investing in fixed income is not a one-time activity. The investor should review their portfolio performance on a half-yearly or yearly basis and make changes if required.