When EPF contribution stops
Your EPF contribution stops as soon as you leave a job that deducts EPF deductions or get employed in an organisation beyond the scope of the EPF Act. Contributions stop, but the account is active for some time. It still 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 any contribution is not made in 36 months (three years), the account becomes "inoperative." Till then, it keeps earning interest at the prevailing EPF rate. After that, no new interest is accrued. Your accrued balance, nevertheless, remains safe with the EPFO and can be withdrawn by you whenever you become eligible. Your money does not vanish so, but at the same time, it stops growing after some time.
Impact on withdrawal and taxation
You can withdraw your EPF balance if you are unemployed for over two months. Nevertheless, if you have less than a total service period of five years, the amount withdrawn will be taxable. Your employer's contribution and your contribution—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.
Transferring your EPF on job change
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 your record of service whole, conserves tax relief, and helps your savings grow without any interruption.
Why you shouldn't ignore your EPF account
Not investing 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. Additionally, an old or forgotten account retrieved later on might be troublesome, if your KYC details or bank details are outdated.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 maximize your retirement savings.
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