Employees Provident Fund Organization
EPFO: Job uncertainty is nothing new for employees working in the private sector. Sometimes due to economic recession, sometimes company layoffs, or sometimes search for better opportunities in career, whatever be the reason, changing or leaving a job has become a common process. In such a situation, when an employee is unemployed or takes a long break, his biggest concern is about his savings. The most important part of this deposited capital is Provident Fund i.e. PF. Often this question arises in the minds of people that if there is no job and money is stopped being deposited in the PF account, will the interest on the old deposited money also stop?
The biggest confusion regarding PF account
The common belief is that if you leave the job, no new contribution comes into your PF account. In such a situation, the government stops paying interest on the money lying in the account. Due to this fear, many people withdraw their entire PF money in a hurry, which has a negative impact on their retirement savings.
In this era of technology where jobs are changing rapidly, it sometimes takes years to get a new job. In such difficult times, PF money is the only ray of hope. But does interest really stop after 3 years? The answer is- absolutely not.
Does interest really stop after 3 years?
Actually, even after leaving the job, your PF account keeps earning you. The misconception spread in the society that “interest will stop if there is no transaction for 3 years,” is actually the result of old rules and incomplete information. This rule was for those who have retired, and not for those youth or employees who have left the job midway.
Even if you have lost your job and remain unemployed or do not do any work for the next 4-5 years, the money in your PF account will still keep increasing. EPFO will keep adding interest on your deposited money until you reach the age of 58 years.
That rule of 2016, which changed the whole picture
Before 2016, there was some ambiguity in the rules, due to which the concept of ‘3 years’ became popular. But the government made an important amendment in the EPF rules in 2016. After this change the situation has become completely clear.
According to the new rules, if an employee leaves the job before the age of 58 years, his account will not be considered ‘inactive’. Even if not a single penny is deposited in that account for years, the government will continue to credit interest on it as per the interest rate declared annually.
It is important for employees to understand when the ‘inactive account’ rule applies. Stoppage of interest on PF account is directly related to your retirement age. If you have turned 58 and have taken retirement, then if you do not claim the money for 3 years, then interest on it stops.