Negating its prior decision to discontinue paying interest on EPF accounts which has remained in operative for 3 years or more, the EPFO has taken a new decision whereby it has decided to continue paying interest even on accounts which have remained inactive for 3 years. It is only after retirement that the EPFO will stop serving interest to these accounts and all those accounts will be deemed as inoperative which were inactive for 3 years. The new decision was taken keeping in mind the following points.
The importance of EPF contribution: The EPF contribution refers to that 12% of an individual’s salary that goes to the EPF corpus. This contribution is made every month. The amount of contribution to be made is fixed by the EPFO every year. The contribution is tax free. Thus, besides acting as retirement scheme, the EPFO also acts as a tax saving scheme. Tax is not deducted upto a contribution of 1.5 lakhs in the EPF fund. Not only this the interest earned on the EPF amount is also Tax free.
The EPF is also backed up the government thus there is no risk of loss in case of downfall of the market. The current rate of interest that is fixed for the EPF account is 8.65% per annum. The rate of interest varies every year.
The introduction of the UAN number: Earlier an account holder had to face a number of problems while changing a job. He or she only had two option in hand that is either to withdraw the money from the EPF account or leave the amount with the previous organisation.
Further, the account holder also had to face the problem of employer’s intervention in the process of EPF withdrawal making it difficult for him/her to withdraw the complete amount. These problems used to break the expectations of the employee and they end up leaving their EPF account with their previous organisations which later becomes inactive. Keeping all these problems in mind the EPFO has introduced the UAN number.
UAN is the acronym for Universal Account Number. This number acts as an umbrella which has the power to include not one but a number of EPF account. Thus, unlike earlier, a person is no longer required to withdraw his money or keep the EPF account inactive after changing a job. Now, after changing a job a person can simply give the UAN number to the new employer, who will in return tag the number with the employee’s new EPF account.
Conditions for the New Policy
Keeping in mind the above two points the EPFO has taken the decision to continue serving interest to all the EPF accounts with the following conditions.
- An employee will earn interest on the EPF account only till retirement. After retirement, the EPFO will stop paying interest on the account.
- Secondly, if a person does not withdraw the money within three years after retirement then the account will become inoperative.