Your EPF Account Will Earn Interest Even After Quitting Job: Here’s How

When you as an EPF member quit your job before the age of 58 years you may question yourself that what will happen to your EPF account's accumulated balance. Will it be able to earn tax-free interest in the future? If you were a part of the Employees' Provident Fund (EPF) and quit your job before the age of 58, you might be curious to know what happens to your current EPF account. Let me first state unequivocally that your EPF account will continue to gain interest even though no fresh contributions are made before you reach the age of 58. Although the accrued balance up to the date of retirement (58 years) or termination of employment is tax-free, any interest gained on the PF account after quitting, retirement, or termination of employment is taxable under the statute.

It's important to remember that if you resign from your employment before reaching the age of 58, your EPF account will become inactive if you don't file for withdrawal within 36 months of being able to do so. Two years after quitting a job, an employee is entitled to withdraw the entire balance of his or her EPF account, if he or she does not take up another job. Your EPF account can no longer gain interest because it has been inactive. An EPF account becomes inactive in four cases, according to EPFO guidelines:

• If an employee retires after 55 years of employment
• If the employee shifts permanently to another country,
• In case of death of the subscriber
• If no request for account closure is made within 36 months of the date the balance becomes payable on termination of the job, the account will be closed. In other terms, if the employee does not request an EPF withdrawal within 36 months of leaving his employment, his or her account will become inactive.

Interest accrued on an EPF balance becomes taxable if withdrawn before five years of continuous employment, according to income tax law. If an employee works with more than one employer within the first five years of EPF membership, the service will be deemed continuous if the former employer's EPF balance is transferred to the current employer. For taxation purposes, the employee is known to have had continuous service for a term of five years or more in this case.
Considering the above rules, it is advisable to transfer your EPF account to your new employer as soon as possible after switching employment. However, if you are retiring early (before the age of 58), you must take your EPF balance out within 36 months of quitting your employment.