Retirement fund body 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 – with around Rs.44,000 crore deposits in them – out of the total 15 crore employee provident fund accounts are inoperative. The inoperative accounts are those where there have been no contributions by an employee or employers for 36 months.
The retirement fund body had stopped 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.
The EPFO had recently tightened withdrawal norms. According to a new rule notified by 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, he or she can only withdraw his or her own total contribution and 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 The employer’s contribution and the interest earned on it can only be withdrawn after one reaches 58 years of age.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 till the employee reaches 58 years of age, will earn interest or not.
Earlier, if a person was unemployed for two months or more, he or she could withdraw the entire amount (both employee and employer’s contribution and interest earned on it) accumulated in his or her EPF account.
