EPF Rules: In today’s world, many individuals opt for a career hiatus lasting from one to two years. Some step away from their jobs to pursue further education, while others take a break from work to attend to family obligations. Additionally, some may temporarily leave work due to health issues or job loss. In such instances, a common concern people have is regarding the fate of the funds in their EPF account post their job departure.
They often question whether interest will continue to accumulate on the deposited sum after they leave their job or if withdrawing the entire amount is the best choice. When you exit your job, your EPF account remains active, and the total sum deposited in it remains yours. Even if you experience a gap in employment and no fresh funds are added to your account, the EPFO continues to apply interest on the previously deposited sum following the set guidelines.
Duration of interest payment
As per EPFO regulations, your EPF account will keep generating interest even after you leave your job until you turn 58. However, there’s a specific provision: If an individual resigns from their job at or after the age of 55, they will receive interest for a maximum of three years only. Following this period, the account will be deemed inactive, and further interest will not be paid. The current annual interest rate on EPF for the financial year 2025-26 stands at 8.25%. Therefore, if you are on a break, there is no need to be concerned about interest ceasing.
Withdrawal during a career break
Under the revised EPF regulations, employees can withdraw up to 75% of their EPF balance immediately after leaving their job. The remaining 25% can be withdrawn only if the individual remains unemployed for 12 consecutive months. Unlike in the past, the withdrawal sum now encompasses the employee’s contribution, the employer’s contribution, and the interest earned on these contributions. However, financial experts advise against hastily withdrawing from the EPF during a career break as it could significantly impact your future retirement savings and reduce your overall funds.
It is essential to consider tax implications when withdrawing from your PF account. If you have not completed five years of continuous service and withdraw funds before that period, you may be subject to taxation on your EPF withdrawal. Conversely, if you have completed a minimum of five years of continuous service and then withdraw funds due to retirement, resignation, illness, disability, company closure, or any other valid reason, your entire EPF balance remains entirely tax-exempt. Thus, withdrawing funds before completing five years of service can lead to a loss in tax benefits.
Addressing delays in claims
Occasionally, the interest credited by EPFO may take some time to reflect in your passbook. Nevertheless, if your account is active as per the regulations, you are entitled to receive the interest. Typically, online claims are settled within 7 to 10 days provided that the account’s KYC details are complete. If a claim remains unresolved after 20 days, members can file a complaint on the EPFiGMS portal. Under the new regulations, if a claim is not settled within the specified timeframe without a valid reason, a penal interest of 12% per annum can be imposed on the responsible officer.