As many of you might be aware, an Employees Provident Fund Organisation (EPFO) member is entitled to Employees Provident Fund (EPF) if s/he works in the private sector and draws a salary of at least Rs 15,000 monthly. This amount collected in the EFP account is often left alone as an investment by people as it receives a whopping 8% (approx) interest from the government. However, there are some conditions in which one can go for the EPF withdrawal that includes instances like job loss, job switch, etc.
Also, many people, post job loss or job quitting, opt to take out the EPF balance thinking that it would seize or stop earning interest and so on. But, that is not the case. One’s EPF account continues to earn interest till the EPF account holder becomes 58 years of age.
Speaking on the EPF interest credit rule in one’s EPF account SEBI registered tax and investment expert Jitendra Solanki said, “It has been noticed that EPF balance goes unclaimed after the job loss or due to the job switch. However, for information to the EPF account holders, one’s EPF account continues to earn even when there is no EPF contribution coming into the EPF account. So, in case if someone has lost one’s job and is facing financial crisis, one should try to find other ways instead of EPF withdrawal as it should be the last option. By doing this, one would be able to let one’s retirement fund intact and the fund would continue to earn even when the EPF account holder is not earning.”
Kartik Jhaveri, Director Wealth Management at Transcend Consultants also advised people to continue with the same EPF account at new recruiter instead of opting EPF withdrawal. “In the case of job switch, it’s advisable to carry one’s EPF account at the new recruiter. This will help the EPF account holder to remain eligible for the Pension Benefit as one’s EPF account gives EPS benefit too. This EPS benefit is given to those EPF account holders who continuously maintain one’s EPF account for at least 20 years.”
Elaborating how one’s EPS account benefit comes and how the wealth gets accrued in this EPS account Jhaveri said, “As per the EPFO norms, an employee contributes 12 per cent of one’s basic salary as EPF contribution in one’s EPF account and the recruiter too contributes same 12 per cent in the EPF account. But, out of 12 per cent recruiter’s deposit, 8.33 per cent goes into the EPS account while the rest 3.67 goes into the EPF account.”
Both Jhaveri and Solanki highlighted that while the above-mentioend case applies only when one’s EPF account is active but even at times when it’s inactive, i.e. neither the employee nor the recruiters’ deposit money in the EPF account, in that case too, yearly EPF interest rate announced by the EPFO will get accrued on the EPF balance and this will continue till the EPF account holder turns 58.