EPFO alert! Have this PF account? It can help your money grow; experts show you the money
EPFO rules say if there is no contribution in Provident Fund (PF) account for three years, it becomes an inactive or dormant, but it will continue to accrue interest.
EPFO or Employees' Provident Fund Organisation handles the Provident Fund (PF) affairs in India. It covers both governments, semi-government and private employees. In the case of private employees, it has been found that people switch from one job to other leaving their PF account without continuing it with the new recruiter. Sometimes, they neither withdraw from the PF account with their previous employer, nor they continue it with the next employers. In such a case, their PF account becomes dormant after three years. According to the tax and investment experts, this dormant PF account was not yielding interest rate earlier but in 2016, EPFO rules got changed and now this dormant PF account too accrues PF interest rate applicable to the operational PF accounts at that time.
Speaking on the EPFO rules that allows PF interest rate to be credited in one's PF account even when it is dormant or frozen, Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "In 2011, PF interest on dormant or frozen PF accounts were discontinued but in 2016 this has been continued again. Now, EPFO guidelines say that PF interest will be credited in dormant PF accounts also till the PF account holder becomes 58 years of age." In short, if there is no contribution for three consecutive years, then the PF account becomes inactive or dormant, but the PF account holder will continue to get the PF interest until he or she becomes 58 years of age.
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Elaborating upon why one may not withdraw one's PF, Jitendra Solanki, a SEBI registered tax and investment expert said, "Under the EPFO rules, one has to carry forward one's PF account with new employer but in case he or she fails to continue one's PF account with their next employer, EPFO gives them two options — either leave it as it is where it is or withdraw one's PF. Generally, people avoid withdrawing one's PF as it will deny them pension benefits after retirement."
Solanki also mentioned that if the PF account is less than 5 years old, then provident fund withdrawal will attract Income Tax on the interest earned on it. So, keeping the income tax rule in mind, people may think of leaving their PF account untouched and withdraw once it crosses the five-year income tax exemption norms.
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