EPFO Considers Interest on Inoperative Accounts
The Employees' Provident Fund Organisation (EPFO) is likely to consider a proposal today to provide interest on inoperative provident fund accounts.
According to the Economic Survey for 2015-16, over 9 crore accounts, with around Rs. 44,000 crore deposited in them, out of the total 15 crore employee provident fund accounts, are inoperative. Inoperative accounts are those where there have been no contributions by an employee or employers for 36 months.
The retirement fund body had stopped the payment of interest to such accounts from April 1, 2011, to encourage employees to either withdraw or transfer their balance in inoperative accounts to an active one.
Recent Changes in Withdrawal Norms
The EPFO had recently tightened withdrawal norms. According to a new rule notified by the Ministry of Labour and Employment last month, if a person, after being unemployed for two months or more, wishes to withdraw money from the EPF account, they can only withdraw their own total contribution and the interest earned on it. The employer's contribution and the interest earned on it can only be withdrawn after one reaches 58 years of age.
After the tightening of the withdrawal norms, there was a need for clarity on whether the employer's contribution and interest earned on it, which will remain locked in an inoperative account until the employee reaches 58 years of age, will earn interest or not.
Earlier, if a person was unemployed for two months or more, they could withdraw the entire amount (both employee and employer's contribution and interest earned on it) accumulated in their EPF account.
From India, Thana
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59The Employees' Provident Fund Organisation (EPFO) is likely to consider a proposal today to provide interest on inoperative provident fund accounts.
According to the Economic Survey for 2015-16, over 9 crore accounts, with around Rs. 44,000 crore deposited in them, out of the total 15 crore employee provident fund accounts, are inoperative. Inoperative accounts are those where there have been no contributions by an employee or employers for 36 months.
The retirement fund body had stopped the payment of interest to such accounts from April 1, 2011, to encourage employees to either withdraw or transfer their balance in inoperative accounts to an active one.
Recent Changes in Withdrawal Norms
The EPFO had recently tightened withdrawal norms. According to a new rule notified by the Ministry of Labour and Employment last month, if a person, after being unemployed for two months or more, wishes to withdraw money from the EPF account, they can only withdraw their own total contribution and the interest earned on it. The employer's contribution and the interest earned on it can only be withdrawn after one reaches 58 years of age.
After the tightening of the withdrawal norms, there was a need for clarity on whether the employer's contribution and interest earned on it, which will remain locked in an inoperative account until the employee reaches 58 years of age, will earn interest or not.
Earlier, if a person was unemployed for two months or more, they could withdraw the entire amount (both employee and employer's contribution and interest earned on it) accumulated in their EPF account.
From India, Thana
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Further to the above post:
Good news for 9 crore PF a/c holders! EPFO to give interest on inoperative accounts from April 1 | Zee News
This will be good news as interest will be paid. The rationale for denying interest for non-operative accounts was not convincing, stating that this move would prevent the parking of funds. A good gesture.
From India, Pune
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Good news for 9 crore PF a/c holders! EPFO to give interest on inoperative accounts from April 1 | Zee News
This will be good news as interest will be paid. The rationale for denying interest for non-operative accounts was not convincing, stating that this move would prevent the parking of funds. A good gesture.
From India, Pune
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Confusion in Ministry Decisions on Provident Fund Accounts
The Ministry seems to be confused as various decisions are taken hurriedly and later discarded, making a mockery of itself. Earlier, they had decided to stop interest on inoperative accounts that are more than three years old. Employees, after leaving the organization, were not withdrawing the PF funds for several years as they were receiving interest on the amount, as if it were a savings account. To discourage this practice and encourage them to withdraw, they had announced that no interest would be paid on such accounts. However, this decision has been completely reversed, and the PF account is now treated as a savings account.
Moreover, the withdrawal of company PF amounts up to 58 years of age is also prohibited. Everyone is confused about what the next course of action will be as there is no consistency in the decisions taken, leaving everyone in a maze. It appears that there is some confusion in the Ministries, i.e., Labour and Finance, as both seem to be at loggerheads with each other.
From India, Mumbai
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The Ministry seems to be confused as various decisions are taken hurriedly and later discarded, making a mockery of itself. Earlier, they had decided to stop interest on inoperative accounts that are more than three years old. Employees, after leaving the organization, were not withdrawing the PF funds for several years as they were receiving interest on the amount, as if it were a savings account. To discourage this practice and encourage them to withdraw, they had announced that no interest would be paid on such accounts. However, this decision has been completely reversed, and the PF account is now treated as a savings account.
Moreover, the withdrawal of company PF amounts up to 58 years of age is also prohibited. Everyone is confused about what the next course of action will be as there is no consistency in the decisions taken, leaving everyone in a maze. It appears that there is some confusion in the Ministries, i.e., Labour and Finance, as both seem to be at loggerheads with each other.
From India, Mumbai
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Pension Withdrawal and Employee Death
Can anyone let me know if an employee dies before reaching the age specified in the pension scheme (58 years), what can be done? Is there any way to withdraw the pension amount?
While issuing the offer letter, each employee is informed about the CTC and the deductions made from it. A specific amount is deducted for EPF from the employee, and the employer also contributes. Why should the employer's share be withdrawn only at the age of 58 years? How will the employee be informed about their pension amount at the time of withdrawal? Are there any ways to withdraw the full EPF amount of an employee?
Regards
From India, Bangalore
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Can anyone let me know if an employee dies before reaching the age specified in the pension scheme (58 years), what can be done? Is there any way to withdraw the pension amount?
While issuing the offer letter, each employee is informed about the CTC and the deductions made from it. A specific amount is deducted for EPF from the employee, and the employer also contributes. Why should the employer's share be withdrawn only at the age of 58 years? How will the employee be informed about their pension amount at the time of withdrawal? Are there any ways to withdraw the full EPF amount of an employee?
Regards
From India, Bangalore
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Dear Swetley,
I agree with your observation on the tussle between the Labour and Finance ministries over PF funds. However, the current decision is an obvious result of restricting withdrawals up to 58 years of age. The current environment has also changed, with UAN portability, ePassbook, and TDS on withdrawals before completing 5 years. Employees now transfer their membership when they change jobs rather than maintaining multiple PF accounts. Therefore, to me, paying interest on an inoperative account is not a confusing decision.
From India, Mumbai
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I agree with your observation on the tussle between the Labour and Finance ministries over PF funds. However, the current decision is an obvious result of restricting withdrawals up to 58 years of age. The current environment has also changed, with UAN portability, ePassbook, and TDS on withdrawals before completing 5 years. Employees now transfer their membership when they change jobs rather than maintaining multiple PF accounts. Therefore, to me, paying interest on an inoperative account is not a confusing decision.
From India, Mumbai
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EMPLOYEES' PROVIDENT FUND & MISC PROVISIONS ACT '1952.ppt
EMPLOYEES' PROVIDENT FUND & MISC PROVISIONS ACT '1952 [Compatibility Mode].pdf