What happens if you stop contributing to your EPF account?

If any contribution is not made in 36 months (three years), the EPF account becomes "inoperative."

Stopping your Employees' Provident Fund (EPF) contribution can pause your retirement growth and affect long-term savings if not managed properly.

When EPF contribution stops

Your EPF contribution stops as soon as you leave a job that deducts EPF or take up employment in an organisation not covered by the EPF Act. Contributions stop but the account is active for some time. It earns interest as long as it stays within the active time as defined by the Employees' Provident Fund Organisation (EPFO).

Interest earned on inactive accounts

If a contribution is not made in 36 months (three years), the account becomes "inoperative". Till then, it keeps earning interest at the prevailing rate. After the period, no new interest is accrued. Your accrued balance, however, remains safe with the EPFO and can be withdrawn whenever you become eligible for it. Your money does not vanish but it does stop growing after some time.

Impact on withdrawal and taxation

You can withdraw your EPF balance if you are unemployed for more than two months.

If you withdraw your EPF before completing five continuous years of service, the amount withdrawn will be. taxable. The employer's contribution and yours, along with interest accrued, are taxed based on your income level.

Conversely, if you leave the money idle and it continues to accrue interest during the active period, it is not taxed.

Also read | EPF transfer, passbook access to get easier for employees, but more reforms needed, say experts

Transferring EPF

When you switch jobs, it is better to shift your EPF account rather than leaving it dormant. The Universal Account Number (UAN) allows you to link all of your EPF accounts and shift balances with ease through the EPFO website. It keeps record of your service, conserves tax relief and helps your savings grow without an interruption.

Why you shouldn't ignore your EPF account

Not investing in your EPF account will drain your long-term wealth potential. Over years, lost interest and tax savings can make a significant difference to your retirement corpus. An old or forgotten account retrieved later might be troublesome, if your KYC details or bank details are outdated. Periodically updating your EPF details and consolidating multiple accounts will help you stay in financial discipline and maximise your retirement savings.