Many salaried employees have an Employees Provident Fund (EPF) account in which they compulsorily contribute 12% of their basic salary every month. Apart from this, the interest earned on it is tax free up to a certain limit. At the same time, maturity amount is also tax free with certain conditions.
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Many people do not understand the nuances of the EPF scheme. For example, for how long can you keep money in EPF account after retirement or after leaving the job? This means there will be no monthly contribution to the account? If there is no monthly contribution, will interest continue to accrue on the EPF account balance?
If yes, when will it be available and what will be the interest rate applicable on such EPF balance? If you continue to work in the same or a different company even after retirement, can you continue to contribute to the EPF and EPS account? Here information is being given about some points of EPF account, which the contributing member should know.
For how long can you keep money in EPF account after leaving the job?
EPF account remains active when a person continues to make monthly contribution from salary. However, if you have quit working or retired, it is important to know for how long you can keep the money in the EPF account. In such a situation, it should be noted that the EPF scheme allows a person to withdraw 100% of his EPF balance and close the account if he does not join another job within two months. Or the EPF account can be closed at the time of retirement.
What if the money is not withdrawn even after three years?
Vaibhav Bhardwaj, Partner, INDUSLAW, says that if money is not withdrawn from the EPF account within 3 years from the date of termination of employment, the account will be converted into an inoperative account. The amount which has not been claimed under the EPF Act for a period of 7 years is transferred to the Senior Citizens Welfare Fund. After being transferred to this fund, if the amount is not claimed for 25 years from the date of transfer, then the Central Government keeps this amount with itself.
Will the money in the EPF account earn interest?
Till the age of 55 years since the money can be kept in the EPF account for a maximum of three years after the contribution stops. In such a situation, regarding getting interest on this, experts say that interest will continue to be received on the money kept in the EPF account. The interest rate will be the same as notified by the Ministry of Finance.
How will the interest received in EPF account be taxed?
It is true that interest earned from EPF account is tax free except in certain circumstances. However, it is tax free only when active contribution is being made in the EPF account. Deloitte Partner Saraswati Kasturirangan says that the EPF account will continue to earn interest as long as it is operational.
The interest earned will be taxable in the hands of the EPF member. Any earnings by way of interest in EPF account after termination of employment is taxable even if the member has already rendered five years of continuous service with contribution to PF.
What if you continue to work after you retire?
Can you continue EPF contribution if you join the same or some other organization after retirement? On this situation, Akhil Chandana, partner, Grant Thornton India, says that employees who are 58 years old cannot become members of EPS. If the person continues to work after this age, the contribution to EPS will stop, but the contribution to EPF will continue. The contribution of both employer and employee will be deposited in the EPF account.
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