You know that a new EPF account will be created every time you switch jobs, under the same Universal Account Number (UAN). However, have you ever thought of what happens to the older EPF accounts? You have to transfer the balance in your previous EPF accounts to the newer one every time you enter into a contract with the new employer. Delaying or forgetting this ritual may cost you dearly.
Well, does an EPF account become inoperative?
The answer is Yes. Any EPF account that does not get any contribution for 36 months is declared as an inoperative account. When you fail to transfer the EPF account upon change of job, the account remains under your UAN without receiving contributions from your employer. This way, the old EPF accounts may remain inoperative for years.
However, the government has considered the latest trends in a job change and the associated lack of knowledge of individuals to transfer the old EPF accounts to the new ones manually. It has set up certain relaxed conditions recently to mark an account as inoperative. If the employee does not make an application for withdrawal of the accumulated EPF balance even after completing 36 months of retirement:
- After the member attains the age of 55 years
- Due to permanent migration abroad
- Due to the death of the member
- After the member withdraws all the retirement corpus
You must know that the balance in your EPF account continues to earn interest until you reach the age of 58 years. On the other hand, the interest earned after the member ceases to be employed taxable in the hands during the year of credit as declared by the Bengaluru bench of the Income Tax Appellate Tribunal (ITAT).
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What happens once an account is labelled ‘inoperative’?
When an account remains unclaimed and proclaimed to be inoperative for seven years, the unclaimed funds are transferred to the Senior Citizens’ Welfare Fund. The trusts of establishments exempted under Section 17 of the EPF & MP Act, 1952 also comes under the umbrella of the Senior Citizens’ Welfare Fund Rules and are required to transfer the amount to the fund.
The unclaimed funds are to be classified on an annual basis by 30 September of every year. Further, the funds must be transferred to the fund on or before 1 March every year.
Can you claim the funds later?
The unclaimed amount will remain in the Senior Citizens’ Welfare Fund for 25 years. You can claim to be entitled to the unclaimed amount transferred to the welfare fund within 25 years from the date of credit of the unclaimed amount to the fund. After this period, the amount shall be given to the Central Government unless a court order says otherwise.
During this span of 25 years, the exempted establishments are supposed to keep accounts and a list of employee-wise details of each member whose EPF amount was unclaimed and transferred to the Senior Citizens’ Welfare Fund. The features include employee PAN, EPF account number, name, spouse/father’s name of the employee, date of birth, date of joining, the amount transferred, address, bank account number, Aadhaar number, nominee, family members, and more.
To avoid all the drill of letting the EPF account become inoperative and then trying to claim it, you are advised to transfer your old EPF account balance to the newer EPF account as soon as possible. Also, leaving it behind will attract income tax at the time of withdrawal, which is not a great thing anyway!
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