The Central Board of Trustees of Employees Provident Fund Organisation (EPFO) on Thursday proposed to keep interest rates unchanged for FY21 at 8.5%. The government will notify the rates after which the interest will be credited to the accounts of the subscribers.
However, as per the provident fund law, no interest amount will accrue once the account becomes inoperative.
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As per the law, a provident fund (PF) account becomes inoperative in case where an employee retires from service after attaining the age of 55 years or migrates abroad permanently or dies and an application for withdrawal of his accumulated balance is not made within 36 months. Until such time, the interest amount will continue to accrue on the PF corpus.
In case a person has changed jobs and not transferred the provident fund in his/her current account, it will continue to earn interest till the retirement age of 58 years.
In Budget 2021, the government had proposed to tax the interest earned on contributions made over and above ₹2.5 lakh. Currently, interest earned on PF contributions is tax-free. Even the accumulated PF balance is exempt from tax if a person has rendered continuous service for a period of five years or more.
Where there are multiple employers and the PF balances are transferred to the PF account with the most recent employer, the cumulative period of employment with all the employers is required to be seen for the purpose of evaluating whether the employee has rendered continuous service for a period of five years or more.
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