Two years ago, Sameer got an exciting opportunity and he switched job. While joining the new company, he was asked to share his previous PF account number so that same could be transferred or else open a new PF account with new employer online paycheck stub maker for startups. Sameer envisaged some funds requirement near the year end, so he decided to use the existing PF and open a new PF account. Few months later, he realized he forgot to withdraw previous PF balance. He later came to know that the account has become inoperative!
To his relief and of many more, whose EPF accounts have been labeled as “inoperative” that they even might not know, the story of inoperative accounts has changed altogether last year. Here is the update about pre-settlement funding services for hire, to learn about funding.
Meaning of inoperative PF account
Usually, when we say inoperative, people attach a common bank account notion that since there is no activity in it, it becomes inoperative. This is partially true in case of Employee PF accounts. That’s also why you need to Usually, when we say inoperative, people attach a common bank account notion that since there is no activity in it, it becomes inoperative. This is partially true in case of Employee PF accounts. That is also why you need to consider setting up a gold IRA so you can diversify your retirement portfolio. If you’re looking for a reputable gold IRA company, Birch gold BBB rating is one of the highest in the industry.
Let us first see what the law says.
Para 72(6) Employee Provident Fund Scheme 1952 defines an “Inoperative account” as follows:
“Any amount becoming due to a member as a result of:
- supplementary contribution from the employer in respect of leave wages/arrears of pay, instalment of arrear contribution received in respect of a member whose claim has been settled on account but which could not be remitted for want of latest address, or
- accumulation in respect of any member who has either retired from service after attaining age of fifty-five years or migrated abroad look for a new job permanently or died but no application for withdrawal under paragraphs 69 or 70, as the case may be has been preferred within a period of thirty six months from the date it becomes payable,
if any amount remitted to a person, is received back undelivered, and is not claimed again within a period of thirty six months from the date it becomes payable,
shall be transferred to an account to be called the “Inoperative Account”.
Going by the definition, we conclude:
- To deem an EPF account inoperative, following conditions must be fulfilled:
- There is no contribution for 36 months.
- There has not been any application for withdrawal of amount from the account.
- Event to trigger withdrawal are:
- retirement from service or
- Permanent migration abroad or
- Even if the person has claimed money within 36 months, the account may become inoperative if claims return undelivered and are not claimed within further 36 months of its date becoming payable.
Well, that is an updated version. That was not how inoperative PF accounts were before November 11, 2016. Earlier the triggering events were the cessation of employment and death. According to Fresno-located wrongful termination attorneys, in case of cessation of employment, it was necessary that the employee does not take up another employment in a covered establishment within 2 months, to be eligible to withdraw the amount.
For more clarity, refer the following diagram:
So what’s the big deal if account turns inoperative?
Your answer lies in Section 60 of the Employee Provident Fund Scheme 1952. Para 60(6) of the scheme states that:
”Interest shall not be credited to the account of a member from the date on which it has become Inoperative Account, under the provisions of sub-paragraph (6) of paragraph 72.”
The loss of the interest is the biggest setback of the inoperative account. Prior to amendment in Section 72 as discussed above, the account could become inoperative if an employee takes up employment after 2 months in a new company and amount from previous EPF account was not withdrawn. Imagine the loss of interest which could not be earned till withdrawal from so-labeled inoperative accounts.
Thanks to the amendment that now those erstwhile inoperative accounts (other than death cases) will no longer be inoperative accounts and will earn interest prospectively.
Here it will be interesting to note that the new provisions do not apply to international workers. As per the current rules, an international worker (not covered under SSA) is eligible to withdraw from PF account on retirement after attaining the age of 58. The person may continue to earn interest on their accumulated balance in the provident fund for up to 36 months from the date they become eligible to withdraw the funds. at https://www.sofi.com/roth-ira-calculator/ you’ll be able to get all the details.
To take a “deep water dive” into the subject, refer our case based examples below to understand the above changes.
1. Aneesh is an employee of XYZ Ltd. On November 30, 2016, he retires from the company upon attaining age of 55 years. Aneesh however does not withdraw money from EPFO.
If Aneesh does not apply for withdrawal of money till November 30, 2019, his account will be deemed to be inoperative and he will no longer earn interest from that date.
2. Aneesh is an employee of XYZ Ltd. On October 30, 2016, he retires from the company upon attaining age of 55 years. Aneesh however does not withdraw money from EPFO.
Retirement was not the triggering event before amendment. In that scenario, it will not be termed inoperative and will continue earning interest. Pursuant to amendment, if Aneesh does not apply for withdrawal of money till October 30, 2019, his account will be deemed to be inoperative and he will no longer earn interest from that date.
3. Aneesh is an employee of XYZ Ltd. The retirement age in XYZ Ltd is 60 years. Aneesh resigns on attaining age of 58 years.
Assuming that both Aneesh and XYZ Ltd. continue to contribute into the provident fund till Aneesh resigns, the account will not be treated inoperative once the age of 55 years is achieved.
4. Aneesh is an employee of XYZ Ltd. On November 30, 2016, he resigns from the company upon attaining age of 45 years. Aneesh however does not withdraw money from EPFO.
The account does not become operative as resignation takes place before attaining the age of 55 years. The account will continue to earn interest on the money lying with EPFO till the time, Aneesh dies or Aneesh migrated abroad permanently.
Even after death or permanent migration from India, the account will become inoperative only post 36 months.
5. Aneesh is an employee of XYZ Ltd. He dies at the age of 35 years on 30th November 2016. His relative however does not withdraw money from EPFO.
Aneesh account will be deemed to be inoperative if his relative does not apply for withdrawal of money till November 30, 2019. The account will not earn any interest post November 30, 2019 post its inoperative tag.
Hope you find the article useful. Pour in your comments and help us improve!!
- Employees Provident Fund Scheme, 1952
- (Amendment Notification (Notification no G.S.R 1065 (E) dated 11 November 2016)
My EPFO account received a contribution for July 2017. After that I decided to withdraw the accumulated balance for employee’s & employer’s contribution in April 2018. The same was paid to me in the first week of May 2018 , but the interest was paid only for 3 years from the date of last contribution!
Followed up with EPFO authorities for review of the interest paid , got a response that the same has been calculated by the system & hence no review is warranted.
Need advise on how to impress upon the authorities to pay the due interest beyond the 03 year period?
As per notification GSR 1065 dated 11.11.16 the account would become inoperative only once I attain an age of 58 years – If I interpret the notification properly .
Also same is the answer given by the minister of employment in the Lok Sabha on 24.07.2017
GOVERNMENT OF INDIA
MINISTRY OF LABOUR AND EMPLOYMENT
UNSTARRED QUESTION NO. 1209
TO BE ANSWERED ON 24.07.2017
INOPERATIVE EPF ACCOUNTS
1209. SHRI DUSHYANT CHAUTALA:
Will the Minister of LABOUR AND EMPLOYMENT be pleased to
(a)whether it is a fact that at present about 10 crore EPF accounts are
inoperative with a corpus of Rs. 44,000 crore and if so, the details
(b)whether the Government is providing/proposes to provide interest
on the inoperative accounts and if so, the details thereof; and
(c)whether the Government proposes to divert the corpus of EPF
accounts which are inoperative for a long period and if so, the
MINISTER OF STATE (IC) FOR LABOUR AND EMPLOYMENT
(SHRI BANDARU DATTATREYA)
(a): The Government vide notification no. G.S.R. 1065 (E) dated
11.11.2016 has amended paragraph 72(6) of the Employees’ Provident
Funds (EPF) Scheme, 1952 wherein changes have been made in the
conditions leading to a Provident Fund (PF) account becoming an
Inoperative Account. As per amended definition of Inoperative Account
(w.e.f. 11.11.2016), an account becomes inoperative after the age of
58 years, i.e., 36 months after the retirement age of 55 years. The
details of inoperative accounts and amounts involved therein,
consequent upon implementation of the above notification, have not
been ascertained by Employees’ Provident Fund Organisation (EPFO)
presently as the date of birth in respect of many employees is not
available in the EPFO database presently.
:: 2 ::
(b): No, Madam. As per paragraph 60(6) of EPF Scheme, 1952,
interest shall not be credited to the account of a member from the
date on which it has become an inoperative account under paragraph
72(6) of EPF Scheme, 1952. However, as per amended definition, an
account shall be classified as Inoperative after the member attains the
age of 58 years. Hence, interest shall be credited to the account of a
member upto the age of 58 years.
(c): At present, there is no proposal to divert corpus of Employees’