Here's why no interest credited in PF account

This is a report about Shweta. After taking a  break for five years, Shweta rejoined the office again. She was shocked when she opened passbook of her PF account. She came to know that there was no interest credited to her PF account for the past two years.

The reason is that since Shweta had taken a break of more than three years, her PF account became inactive and hence she did not receive any interest on it.

The Employees Provident Fund Organisations (EPFO) has divided PF accounts into two categories – active and inactive. Those accounts where regular contributions are made fall under the active category. While those accounts where no amount has been deposited for 36 months, fall under the inactive category. The same thing happened with Shweta’s PF account.

Interest is credited regularly in case of active accounts. However, interest stops getting credited  on inactive accounts after a certain period. As per the rules of EPFO, Shweta received interest for first three years of her unemployment. But, as, no contribution was made for three consecutive years in her account, she stopped receiving interest credit. But now that Shweta has started a new job, her account will become active again. She will start receiving interest on the deposits lying in her account.

When a PF account becomes inactive
Taking a  break from job just like Shweta, or leaving a job, or going abroad, or even in case of death, if no contribution is made in the account for three years, it becomes inactive.

So, what happens if you shift to a new job? Will you still get interest on balance in the previous account? The answer is yes. You will keep getting Interest on your previous PF account on changing jobs. According to EPFO, if a person is employed, then his previous accounts will be considered active. That is why while changing jobs, the previous PF account should be merged with the new organisation’s account. If for some reason, the account is not merged, then also you will keep getting interest. If there is a gap of more than three years between one job and another, then, you will stop getting the interest.

Shweta has resumed her job after a five-year break. If she continues to work,  PF will be deducted till she turns 58. During all these years,  interest will continue to be received regularly. Under EPFO rules, the retirement age is 58 years.  After this, she can withdraw the full amount of her PF.

Interest is available only for three years after retirement. This amount is added to the annual income of the account holder. accordingly  tax will have to be paid. After retirement, a person is not considered as an employee.

People like Shweta, who take  break from job in a planned manner and intend to work further, should keep money deposited in their PF account. If they do not intend to work further after leaving their job, then, they should withdraw PF money within three years. Because after three years, they will stop getting credit of interest.