Old Inactive EPF Account – Should you withdraw or continue?

Share This Post

Share on facebook
Share on linkedin
Share on twitter
Share on email

Do you know Government may forfeit your old inactive EPF account? Many of us just keep the account idle without withdrawing it. However, do remember that inactive EPF accounts may be forfeited if you don’t know the exact rules.

As many of us know, EPF currently providing the tax-free 8.5% rate of interest. This is one of the best debt products which is offering such high returns with utmost safety. Hence, many salaried usually not withdraw and keep it as it is. However, there are certain rules to it. Don’t blindly believe that you can keep your EPF account as long as possible.

What is the meaning of Inactive EPF Account?

Before jumping into the recent changes, let us first understand what is the meaning of inactive EPF accounts. Many confused here to understand the difference between non-contributory accounts and inactive accounts. Here, two points to understand and they are as below.

# Earlier, when EPFO announced that for any non-contributory EPF accounts, they will not credit the interest, EPFO defined inactive account as “any EPFO Account which fails to make contributions for 36 continuous months (3 Yrs) is called INOPERATIVE Account. In addition to this, if you applied for a withdrawal but due to wrong address, bank details, or some other reasons you fail to claim the amount and laying with EPFO for 36 months (3 Yrs) from the date of it become payable are also classified as INOPERATIVE Accounts.”

I have written a detailed post on how you can check your account status online. Refer to the post “What is an Inoperative EPF Account and how to track it online?“.

However, later on, EPFO clarified that interest will be payable on such a non-contributory period for up to the age of 58 years of the member, this 3 years definition turned useless. As per the current rules, EPFO will credit the interest on such non-contributory accounts up to the age of 58 years. After 58 years, the account will be treated as INACTIVE (but not immediately after 3 years non-contributory period).

The retirement age for EPF is 55 years. Hence, EPFO will pay you the interest up to the age of 58 years (Retirement age+3 Yrs).

I have written a post on this by sharing the EPFO notification. You can refer the same at “Interest on Inoperative EPF Accounts up to 58 Yrs of age“.

Sharing the notification image for your benefit also.

Meaning of Inoperative EPF Accounts

# However, interest earned on such inactive accounts is taxable income for you. Yes, earlier many thought that interest earned on all EPF accounts are tax-free. However, the ITAT (Income-Tax Appellate Tribunal) in one of its orders has clarified that the EPF interest income is taxable, if PF member is not employed. ‘Any interest income accrued on EPF post-retirement / resignation is taxable in your hands.’

If you resign, retire or get terminated from your job, but do not withdraw your EPF immediately then interest income earned on your EPF balance is taxable during this non-contributory period. The interest income earned during your employment remains tax-exempted though.

Let me share all these important points through this below image.

Definition of Inactive EPF account

Inactive EPF Account and Senior Citizen Welfare Fund

The above mentioned rules are from EPFO and Income Tax Department and I hope that you get the clarity on this aspect. Now, in the year 2016, Government introduced Senior Citizen Welfare Fund (SCWF).

Unclaimed money from EPF accounts, as well as from small saving schemes, insurance companies, etc. was supposed to be transferred. As per the SCWF regulations, after an account has been classified as inoperative for ten years, the amount remaining in it is to be transferred to SCWF.

Let me explain the same through the below image.

Status of EPF Accounts under Senior Citizen Welfare Fund (SCWF)

You noticed that once your account turns inoperative, for the next 10 years, you can still earn the interest (subject to 58 years of age limit as explained above). If you do not withdraw the EPF account, then it will be moved to the SCWF account, where it will earn the interest rate of SCWF (declared by Govt on annual basis). The recently declared interest rate on Senior Citizen Welfare Fund interest rate for FY 2020-21 is 5.81%.

For the next 25 years, it will be in that SCWF and during this period, you or your nominee can claim the amount through EPFO. However, once it completes 25 years, then the Government will forfeit your EPF balance and none can claim this at later stage, unless otherwise directed by a court order.

Old Inactive EPF Account – Should you withdraw or continue?

Based on the changes of EPFO, ITAT and SCWF, we can conclude as below for the simplicity.

# Your account will turn inactive only when you reach the age of 58 years and not withdraw the EPF balance (Earlier it was 3 years from the non-contributory period).

# From the date of non-contributory EPF to the time of withdrawal, you are eligible to earn the interest. However, such interest is taxable.

# If you keep your non-contributory EPF accounts for more than 10 years, then EPFO will move your account to SCWF.

# Your EPF account will remain with SCWF for the next 25 years and earn the interest rate declared by Government on such SCWF.

# You or your nominee can claim the EPF amount from SCWF through EPFO during this period of 25 years.

# After the completion of 25 years with SCWF, if you still not withdraw your EPF account, then Government will forfeit the money. To get back the money, you have to knock the court.

Do remember that such movement to SCWF will not happen automatically. Instead, EPFO will inform you through the contact details you linked to EPF accounts. If you still not respond and not withdraw, then they move to SCWF.

Hence, considering all these rules, it is always best to transfer your old EPF accounts to the existing active EPF account immediately. Otherwise, withdraw the EPF balance immediately after 2 months from the non-contributory period or unemployment.

Refer our latest posts :-

More To Explore

38 Responses

  1. Dear BasuNivesh,
    Excellent post.
    Feb 2014 was last contribution from my side to PF, after that i changed job and tried to transfer the balance but it somehow could not done.
    I have UAN number, is it possible to link this old PF with existing UAN?
    When i tried to allot UAN for this PF account online, it says PF number is not valid(until 2018 i was getting balance detail on my mobile).
    Can you help to solve this problem.
    Office and EPFO both are in Chennai.

  2. Hi sir,
    I was working in a company till march 2018 which had EPF provision and had a PF account.
    From march 2018 till April 2021 I worked for a small company which had less than 10 employees and didn’t have PF.
    Now, from April 2021, I’m in a company which has PF.

    I login to my UAN portal and see 2 EPF accounts, older and latest.

    1. So, will my older account keep getting interest credited?
    2. Can I merge with newer account or leave it separate?
    3. Can I withdraw my older account now ?

  3. I left my job with a private organisation in January 2018, more than three years ago, at the age of 52. I have not withdrawn my provident fund.
    Now the company is migrating its private PF to the government fund. My question is that will I get the interest on my PF corpus till the age of 58, even after this migration from their private PF trust to the government held fund.

  4. Dear Basavaraj,

    I was employed in India till August 2018 and then I moved to Europe permanently for the job. From then it is almost close to 3 years I have not contributed to my PF account. I want to keep this as an investment as it fetches 8.5% interest for next 4 to 5 years. As per the information you have provide earlier in this, I need to pay the tax on the interest earned post my last contribution period. I am ok paying tax on the interest earned. Do you suggest me to continue keep the money with my PF account as I planned or withdraw and put in bank fixed deposit? Another question is post 3 years not contribution period will my online PF account using UAN number will continue working and will I be able to withdraw the money with online withdrawal request? please clarify.

    Thanks

  5. Hello Sir,
    I lost my job in September 2020, and since then have been self-employed. I intend to remain self-employed going forward.
    But I have an EPF account for which I have not decided what to do after loosing the job.
    I am 40 years of age, can you please guide:
    1. How long can I keep my EPF account?
    2. What should I do to keep the account active/operative? Can I make small regular withdrawls to keep it active?
    I do not need the money right now, and mainly want to keep it as a retirement fund.
    Thank you.

  6. I have 4 PF account being shown in my UAN account, so all of them are linked with my UAN. All of these 4 a
    PFs are from my previous employers. I am working with a fifth organization now and they have thier own PF fund which doesn’t show in my UAN.
    1) Does it mean all 4 are merged or should I specifically merge them.
    2) I will continue to get interest till age of 58 but I will have to pay tax on that. How to avoid this?

  7. Dear Basavaraj,

    If I withdraw my PF balance while in service, is that amount taxable? Or is it that withdrawal is taxable only if I am unemployed/ between jobs

  8. Hello Sir,

    Under my UAN account I there are two accounts. One account from Old employer and another from New employer.

    Do I need to merge the same?

      1. Hello Sir,

        There is one more issue.

        Due to some financial issue, my company has not paid me salary from August 2020 to Dec 2020 and hence they is no contribution to EPF for the same time period.

        Although, From Jan 2021 I switched to a new company.

        In such a scenario should I wait for the remaining contribution OR I should move ahead with the merger of both PF accounts.

  9. Sir,
    I had period for service in Patheja forging and stamping Pune 1996 to 1997. After some year gone I heard company close entire business and due to lost profit company stop. Now I have no details about company EPF account only salary slip with us in that pf contribution mention and 4dugit a/c no. My question is after 27 year is possible to withdraw or continue that pf account.

  10. Please share how to withdraw from inoperative account.
    I live at Ahmedabad but my earlier company was registered with RajkotEPF.
    I tried reaching them through email but with no use. Can i withdraw it through online mode. My old employer is not reachable. My account is 14 years old.

  11. You have written :
    Quote – “Hence, considering all these rules, it is always best to transfer your old EPF accounts to the existing active EPF account immediately. Otherwise, withdraw the EPF balance immediately after 2 months from the non-contributory period or unemployment.” – Unquote

    My question is, why are you recommending withdrawal as the best option, if I can continue to earn interest of 8.5%, though taxable, upto the age of 58?

    1. Dear Sandeep,
      If you forgot to withdraw before 10 years, then it will be moved to SCWF where it will earn less returns than EPF and you have to do a lot of processes to get it back. Hence, I am not saying you withdraw it INSTANTLY. But cautioning you that have an eye on such inactive accounts and withdraw it.

  12. I have completed 59 years of age. In January 2021 , I was laid off by my company on account of reduced business operations. The company has done the last contribution in the EPF account in December 2020. I have been searching for a full time job, however have not found one till date.
    My queries are as below – 1. Will my EPF account continue to accrue interest until I find a new employer and the EPF contribution restarts? 2. If Yes, up to when will I receive the interest? 3. If No, when will the interest stop ?
    I am in a dilemma. Pls clarify the current EPF rules on the above scenario.

  13. Nice informative article. But I find EPFO as a trauma centre. Inspite of following all the procedures and mentioning unemployed for more than a month, the claim gets rejected. Prior to that while I was in the job, it took 3 years for EPFO to do KYC of my account. For few months, I had to visit EPFO office daily. Sometimes they used to as for to he same documents more than 3 times as they could not find it. I wish I had a choice not to open EPF account. In India things are too slow.

    1. Dear Meena,
      I completely endorse your views. It is completely a mess. When you are joining a new organization and your salary (basic+DA) is more than Rs.15,000, you choose to opt away from EPF.

  14. Hi..
    I have left job ( rather terminated by employer due to not rejoining after my father’s demise & some family issues) in Sept 2014 and didn’t withdraw my account due to some spelling mistake on my father’s name while registering by my employer so that I am not able to link my aadhar with EPF account on their portal using UAN ( I have UAN number ).. ..
    Now company is almost closed and bankrupted and no contacts are available and not able to correct the spelling mistakes…
    So now how to withdraw my amount without the employer…? The company was in Chennai and I am in BELGAVI Karnataka …
    Kindly provide guidance..
    Thanks..

  15. Hello. Thanks for this post – it was informative, as always!

    Why do you recommend – withdraw the EPF balance immediately after 2 months from the non-contributory period or unemployment?

    We are going to get the interest for at least 3 more years – even if it’s taxable. Doesn’t it make sense to keep money there for at least 3 years & earn money?

    I am asking this as recently I resigned from my company in India & moved to Canada as a Permanent Resident. I was thinking of keeping my EPF money for at least 3 years with the EPFO & then withdraw. Is it the correct approach?

    1. Dear Varun,
      Please refer the above post. It is not only for 3 years, but up to 58 years of your age, you will get the interest on EPF account. However, if you not withdraw within 10 years, then it will be moved to SCWF. Hence, in your case, better to withdraw before 10 years of completion.

  16. Hi Basu,
    Thanks for this informative post.
    However, I have query with respect to the taxable interest that EPF account earns during non-contribution period.

    Say for example, I switched a job but there is a 2 months gap before I join my new employer and start contributing to new EPF account orPrivate trust with new employer.
    Now for next 2 months, my EPF account (with previous employer) goes to non-contribution mode. Similary after joining new employer, they generally recommend us to wait for 2~ 3 complete pay checks before intiating a EPF fund transfer from pervious employer to current employer EPF/Private trust.
    In this scenario we are looking at a non-contribution period of 5 months to my old EPF account.

    So during this 5 months, will the interest earn on my old EPF account be taxable? If yes, how will it be calculated and will it reflect in my form 16 as a taxable income for that FY automatically?

    Secondly does this Taxable interest rule also applies for Private trusts of employers?

    Appreciate your input

    Regards
    Ayas

    1. Dear Ayas,
      Theoretically YES taxable. But sadly no mechanism through which you can calculate automatically and file during ITR. The reason is that even though you calculate on your own, in many times, EPFO will update the passbook lately (usually after you finish ITR filing for that particular year). Hence, it is you who has to take care of such small issues on your own to avoid future complications.
      Yes, this rule is applicable to all EPF accounts.

Leave a Reply

Your email address will not be published. Required fields are marked *

Looking for Unbiased, Simple and Conflict-Free Financial Planning Service?

We neither SELL any product nor represent any Insurance or Mutual Fund Companies.

We offer you an unbiased Fee-Only Financial Planning Service.