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.
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.
# 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.
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.
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.
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.
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View Comments
Hello Sir,
Could you please clarify my query regarding PF passbook history?
I notice that in the updated EPF passbook portal, its not showing my first company service details while it shows rest of the 4 companies after that. When I try to raise PF grievance, the old PF number is not accepting and unable to raise grievance.
Can you please let me know if there is a way to get this updated? I have a Annex-k from the 1st PF office on the service with me.
Thanks
my mother left the Job in 11/2009 . 2016 age is 58 so intrest cridit how many years 08/2023 PF form 19 applied
Dear Suresh,
It is already answered in the above post.
Hi Nivesh,
Kudos for such a clear article on EPF - particularly graphics are simple and self-explanatory....!
I am 52 now and planning for early retirement in few months (53 by then).
EPF will be the major portion of my retirement corpus - looking to park in safe, reasonable interest paying option.
I have two operative EPF accounts under one UAN (old one Govt (contributions till Jul'17) and latest is Trust managed)
Can I continue with both accounts till 58 (2029) or withdraw completely from Govt account in 2027 and Trust account in 2029?
Alternatively?
Withdraw both accounts after 2 months of retirement and deposit in bank?
Thanks in Advance
Dear Muthu,
It is hard for me to suggest anything without understanding your financail status. However, I am of the opinion that better you continue till 58 years.
Hello, Thank you very much for this post. Was very informative.
I have a question.
I left job in 2016 (Did not join any other job). My pf account is currently earning interest. It is 7 years since it has become inoperative.
I am 50 years old now.
The question is will it earn interest for another 8 years ?
or only for 10 years from it became inoperative ? ie, till 2026 ?
Also how is the tax liability calculated ?
At the time of redeeming, do we need to pay the tax for all the previous inoperative years ? (ie, 10 years)
Does this automatically get deducted or should we pay the tax separately ?
I don't have any other source of income as of now.
Dear Krishn,
I have already answered your questions in the above post. Please refer the same.
Thanks for all the wonderful work you do to simplify the Govt jargon. Noteworthy is the update of the confusing 3 years interest timeline on EPF being useless and replacing it with interest upto the age of 58 years for inactive accounts.
My other take is on the taxability angle of EPF interest received after employment till the age of 58. Here it would be correct for IT to consider taxability on the Employer stream of funds and spare the Employee stream as their welfare after service is the primary objective of this scheme. Your thoughts on this would be valuable.
The early retirees should be incentivised for making place for the new Employees!
Dear Vaz,
Sadly government not thinking in this way :)
Hi
I left my first company in 2016 and the second company in 2018 and I have not withdrawn or transferred the PF from both the companies and I am unable to withdraw it online as well.
What should I do ?
Dear Ruchira,
Approach the regional EPFO Offices.
Dear Sir,
Great post.
I have a question. In my case, I worked in India from 2016 to 2018. During that time I managed to build some EPF balance. Later I moved to Canada. Although I am still earning interest, now due to fear of SCWF, would like withdraw all money. If I withdraw full EPF + Pension amount, do I pay tax on full EPF + Pension amount or just the interest earned after 2018? I am very confused with my tax obligation piece.
Dear Kaushik,
I think I have already replied to your message to my phone.
Hello,
My last date of leaving previous employer was 20-dec-2021 and new company DOJ is also same i.e. 20-dec-2021.
When applying for online pf transfer, i have been asked to mark exit date of previous employer, i have mentioned there 19-dec-2021 to avoid overlapping of dates. Now for online pf transfer epfo asking for approval from previous employer. My previous employer not approving it since i have put exit date one day prior to my orginal date of exit.
Now i am in trouble, what to do for my pf transfer.
Dear Prasoon,
Check with current employer whether they accept 21st.
Hello Sir
Myself Dr Gurudath Rao. I was working in India from 2009 to 2013 and then moved to Middle East in 2013. During this period I have worked with 3 companies and there was no UAN during that time. There was name correction I my first MNC company due to which I could not transfer or withdraw amount. All these 3 pf accounts were separate.
I came back in Aug 2016 and joined MNC. My PF from then is in single UAN for which I do not have any issue.
My humble request to you is to kindly guide me how should I get my earlier pf accounts transferred. Whether I am earning interest in these accounts. My phone number is also been changed and I do not have any information regarding these 3 pf accounts, amount and interest details. Appreciate your kind advice and guidance.
Dear Gurudath,
Request for transfer of old accounts to existing one through your current employer.
Hi, I was working from sep-2005 to feb-2019, after feb-2019 I am unemployed,
1) please let me know if my EPF account will be declared as Inopperative account from feb-2022?
2)Will my EPF account stops earning interest after Feb-2022>
)Will I be able to withdraw amount from EPF anytime after feb-2022 also?
Thanks and Regards
Dear Bharath,
1) It is considered an inactive account from 2019.
2) It will earn but its taxable.