Left job before the age of 58 years and wondering what happens to the existing Employees’ Provident Fund (EPF) account?

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Well, it’s worth noticing that the funds in the EPF account continue to remain operational and accrue interest until the employer reaches the age of 58 years. Post 58 years, the account becomes inoperative and no more interest is credited.

Earlier, as Adhil Shetty, CEO of BankBazaar explains, if the account was deemed inactive, no interest would be paid out. However, in 2016, the government modified the conditions.

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"As per the new directives, the age of retirement is taken to be 55 years, and the member has three years after retirement to withdraw the money in the account. Post that, the account would become inoperative, and no further interest shall be credited. This means that even if there is no fresh contribution, the funds in the EPF account will continue to accrue interest until the employer reach the age of 58 years,” Shetty explains.

However, under a few circumstances, a PF account becomes an 'inoperative account' and doesn’t earn further interest amount even before the subscribers attain the age of 58 years.

According to Mahesh Shukla, founder PayMe India, this happens when an employee migrates abroad permanently or dies or in case an application for withdrawal of the accumulated balance is not made within 36 months.

Talking about the taxability of such accounts, Shetty says interest earned after the member ceases to be employed is taxable.

Also read: 5 reasons for rejection of EPF withdrawal claim

"Such interest income will be taxed in the year in which it is accrued. Say, an employee quits his/her job in 2015 and withdrew the EPF in 2021. In this case, whatever the interest he/she earns on the EPF corpus between 2015 and 2021 will be taxed yearly based on the interest amount earned yearly," Shetty states.

While in service, according to Aarti Raote, Partner, Deloitte India, the accumulated balance in the PF account including interest earned payable to an employee is not be taxable if he/she has rendered continuous service for a period of five years or more, or the service period has been terminated by reason of the employee's ill-health or similar contingency beyond the control of the employee.

"In computing the period of 5 years, the employment with other employers would be counted provided the accumulated balance has been transferred to the fund maintained by the other employer," Raote elaborates.

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First Published:Mar 12, 2021 3:32 PM IST