Often this question arises in the minds of employed people that if they leave the job, take a break from their career or do not join a new company, then what will happen to the amount deposited in the old Employees Provident Fund (EPF) account. Many people think that the interest on PF stops immediately as soon as the contribution stops, whereas this is not at all the case. According to the current rules of the Employees Provident Fund Organization (EPFO), even after leaving the job, compound interest continues to be earned on your PF balance at an annual rate. However, this interest is not available for life; For this, EPFO has set clear limits based on age and account status.
Under EPFO rules, if an employee leaves the job before the age of 55 (be it at the age of 30, 40 or 45), then the amount deposited in his PF account Till completion of 58 years of age Interest is received continuously.
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Leaving job before 55 years: If you leave the job prematurely and do not withdraw money from PF, your account is considered active and keeps adding interest until you turn 58 (superannuation age).
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Interest stops after 58 years: As soon as the member completes 58 years of age and there has been no new contribution in the account for the last 36 months (3 years), the account will be declared 'inoperative' i.e. Inoperative Account Is declared. After it becomes inoperative, further interest on it stops completely.
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Retirement at or after 55 years: If an employee retires at or after 55 years of age and does not withdraw PF for the next 36 months, then after lapse of 36 months the account becomes inoperative and interest on it stops.
Under Para 72(6) of the EPF Scheme 1952, an account is considered 'inoperative' when:
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The member must have retired from service after attaining the age of 55 years and no claim has been made for 36 months.
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The member is permanently settled abroad.
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The member has died and the dependents have not applied for withdrawal.
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The member must have completed 58 years of age and no new contribution has come.
| Situation | interest period | When will the account become inoperative? |
| Left job before age 55 (e.g. 35 or 42 years) | Interest will be available till completion of 58 years of age | On completion of 58 years of age |
| Retirement at or after the age of 55 | Up to 36 months (3 years) after retirement | After 36 months from the date of retirement |
| Retirement at 60 years (in special cases) | Up to the age of 63 years (3 years grace) | On completion of 63 years of age |
Even though EPFO pays interest till the age of 58 years, the Income Tax rules are quite strict here:
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During active service: If an employee contributes to EPF for 5 consecutive years or more, there is no tax on his contribution and the simple interest earned on it (within the limit of employee contribution up to ₹2.5 lakh per annum).
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After leaving the job: Whatever new interest accrues on the PF balance in the years following the day you officially leave the job, it will be fully refunded. Taxable It happens.
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Liability as per tax slab: As per Income Tax Department rules, interest earned after termination of service is considered as 'Income from Other Sources' and at the time of withdrawal, tax is to be paid as per the applicable tax slab of the investor.
If you have left one company and joined another company, then instead of withdrawing the money from the old PF, it should be immediately transferred to the PF account of the new employer (through Universal Account Number – UAN). This keeps adding to your total service period (Continuous Service). If the service exceeds 5 years, then there is the benefit of tax exemption on complete withdrawal of money in future. At the same time, if you are leaving the job forever, then it is wise to withdraw your entire fund before the age of 58 years so that you do not have to suffer the loss of account becoming inoperative and interest stopping.