Once your EPF account becomes inoperative, then it stops earning interest. According to EPFO rules, an EPF account becomes inoperative in four situations
New Delhi: Those who switch their job often forget to transfer their EPF account to the new employer. Many people believe that their EPF balance will continue to earn tax-free interest till the age of 58, so they neither transfer or withdraw the balance amount lying in their EPF account.
Also, many people leave their job before the age of 58 years to start their own venture or become entrepreneurs. They often want to know what will happen to the accumulated balance in their EPF account. Will it continue to earn tax-free interest?
Worth mentioning here is that your EPF account will continue to earn interest even after your employment till the age of 58 years even if there is no fresh contribution. However, while the accumulated balance up to the date of retirement (58 years) or end of employment is not taxed, any interest earned on the PF account post resigning, retirement, or end of employment is taxable as per law.
Worth mentioning here is that post resignation from your job before the age of 58, your EPF account will become inoperative if you do not apply for withdrawal within 36 months from the date you become eligible to make an application. An employee becomes eligible to withdraw the entire amount lying in his EPF two months after leaving his job, provided he/she does not join any other job. Once your EPF account becomes inoperative, then it does not earn further interest.
According to EPFO rules an EPF account becomes inoperative in four situations:
-if an employee retires from service after 55 years
-if the subscriber migrates abroad permanently
-if the subscriber passes away
-if no claim is received for settlement of the account within 36 months from the date when the amount became payable on cessation of employment. In other words, if the subscriber does not apply for EPF withdrawal within 36 months of quitting his job then the account will become inoperative.
According to income tax rules interest accumulated on EPF balance becomes taxable if withdrawn before completion of five years of continuous service. In cases where the employee works for more than one organization in the initial five years of EPF subscription, then the service will be considered as continuous if EPF balance of the previous organizations are transferred to the current organization. In this situation, it is considered that the employee has rendered continuous service for a period of five years or more for taxation purposes.
Given the above facts, it is advisable to transfer your EPF account to the new employer immediately after switching your job. But if you are taking early retirement (before the age of 58 years), then withdraw your EPF balance within 36 months of leaving your job.