Don’t forget to withdraw EPF investment on time

K. ARAVIND

The Employees Provident Fund (EPF) is a major investment vehicle for salaried private sector workers. At present, the EPF rate is 8.5 per cent. This is higher than the interest rates on small savings schemes and bank fixed deposits.

The investment period in EPF is till retirement. Employees in companies with more than 20 employees with a monthly salary of up to Rs.15,000 are required to make a compulsory EPF deposit. Even high earners can make EPF investments voluntarily.

The investor is obliged to continue investing until he retires. Only one-time withdrawal is allowed under special circumstances for medical expenses, child marriage and housing.

Only those who have retired from service after the age of 55 can finally withdraw their EPF investment. Up to 90 per cent of the total PF balance, including contribution and interest of the employee and the employer can be withdrawn by those above 54 years of age. This rule does not apply to those who resign before the age of 55. Full EPF balance can be withdrawn in case of non-employment for 60 consecutive days after resignation.

EPF investment must be withdrawn after retirement at the age of 55 years. As per the earlier rules, if there was no contribution in the EPF account for 36 months, it would be classified as inactive account. According to the statutory rules, this only happens after the age of 55. Even if the EPF account has not been contributed for three consecutive years before the age of 55, the account will continue to function and earn interest.

At the same time, a person over the age of 55 can only keep the account active for 36 months after retirement. Failure to withdraw the deposit within 36 months will result in deactivation of the account. Then the deposit in the account will not earn any interest. Interest for a period of 36 months without contribution is also taxable. This interest is taxable when withdrawing EPF deposits.

When the EPF account becomes inactive, the deposit in the account will be transferred to the Senior Citizens Welfare Fund. This amount will remain in the Senior Citizens Welfare Fund for seven years. Every fiscal year on September 30, the unclaimed and inactive accounts are transferred to the Senior Citizens Welfare Fund. The account balance will continue in the Welfare Fund for Senior Citizens for 25 years. After 25 years, the money will be transferred to the Central Government.

Retirees at the age of 55 should take special care to withdraw their investment without waiting for the EPAF account to become inactive.