Is your EPF account inactive? Here's what to do

Two simple steps can solve your problem.

Employees' Provident Fund needs no introduction. It is one of the most popular saving instruments in the world's largest democracy.

Employees' Provident Fund Organisation currently serves around 8 crore subscribers. Most of the employers in the country like to use EPF as a social security instrument for their employees.

But even as yopu read this there are around Rs 23,000 crore lying in inactive EPF accounts.

But when do these EPF accounts become inactive? Do you know what action to take when your EPF account becomes inactive?

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What is an inactive EPF account?

An inactive EPF account is one in which there are no further contributions made to it for 36 consecutive months.

Reasons for EPF account becoming inactive

1. Transfer of employment

An EPF account can become inactive when you shift your job. A lot of times we change our jobs and forget that we already had an EPF account with the previous employer. This is the major reason due to which an account becomes dormant.

2. Company is not in operation

There could be cases where the company is closed due to various reasons. In such cases, you would be concerned about a new job and ignore your PF account.

3. Moving out of country

While moving to another country for employment, we may forget that there is an EPF account which needs to be taken care of.

4. Taking up a business

Few of us might give up on employment and take up entrepreneurship. However, there might be an EPF account for which we would have been contributing a monthly sum for the past few years.

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What happens when EPF account becomes inactive?

Though your EPF account would receive interest for 36 consecutive months, after becoming inactive, there would not be any interest credited to your account.

Dormant EPF accounts are prone to frauds. There have been multiple cases reported of late on fraud EPF withdrawals.

Most of the reported accounts were found to be in inactive mode of operation. Fraudsters linked these accounts to fake bank accounts. Later, these accounts would show negative balance.

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What should you do?

1. Transfer your EPF account

This should be the first thing to do whenever there is a change of employer. It is a very simple process.

The new employer would ask you few details of the old PF account and transfer it to them. If your account is already inactive, you can follow the same process and get the necessary Form 13 filled to transfer the account to your new employer.

Transfers might take up to a month, but if you apply for transfer, the account would no longer be treated as dormant.

Transfer of EPF account is the best option to follow in the event of change of employer since it gets your account back to active mode.

Also, EPF is a long term retirement investment product, and transfer of account will help you get the magic of compounding.

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Withdraw balance from the EPF account

The next best option for you is to withdraw the balance in the EPF account. According to EPF rules, you can withdraw balance from EPF account if you are not employed for up to 2 months from the date of leaving a job. Click here (http://www.epfindia.com/downloads_forms.html) to download the EPF withdrawal form.

Conclusion

EPF is EEE (Exempt Exempt Exempt) financial instrument. It means you can claim a tax deduction up to Rs 1 lakh under section 80c, interest is tax free, withdrawal is also tax free (if done after 5 years of service).

It currently offers an interest rate of 8.5 per cent.

Always keep a track of your EPF account by checking the balance on a regular basis. Now, you can do it through e-passbook. You could also report any of your grievances to the EPFO.