Employee provident fund (EPF) remains a critical retirement tool for salaried employees in India. Under this scheme, a portion of your monthly salary gets acquired into a government backed fund that keeps earning interest.
The Provident Fund (PF) currently offers an annual interest rate of 8.25%. Employees contribute 12% of their basic pay, subject to a monthly wage ceiling of Rs 25,000. Employers also make a matching contribution towards the employee's PF account.
But What Happens When You Change Your Job?
Changing jobs does not mean you lose the money accumulated in your Provident Fund (PF) account. Your existing balance continues to earn interest even after you leave an organisation, while your new employer starts making fresh contributions to your PF account.
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You can also transfer the balance from your previous employer to your current PF account, bringing your savings under one account. This is important for maintaining continuity of service, particularly when calculating the five-year period required for tax exemption on eligible PF withdrawals. By transferring your PF balance instead of withdrawing it every time you change jobs, you can retain the benefit of your accumulated service period.
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What If Your New Job Doesn't Participate In PF?
Many employees feel confused about what happens when their new company doesn't participate in PF. There is a widespread belief that the old PF account stops earning interest after three years of inactivity.
However, that is not entirely true. Your old EPF account stops earning interest when you reach 58 years of age or if the account becomes inoperative due to specific conditions like permanent migration abroad or death.
But assuming you are 30 and moved to a job that doesn't participate in PF, your earlier balance will keep earning interest till you reach age 58. Once you turn 58, the account becomes inoperative and stops accruing interest.
Suppose if you retire at 55 instead of 58, the interest will keep being credited for a maximum of three years.
Examples Of Different Scenarios:
- You join a company that does not offer PF: Your old PF balance continues to earn interest until you turn 58
- You stop working: Your accumulated PF balance continues to earn interest until you reach 58.
- You retire at 55: Your PF balance can continue earning interest till you turn 58.
- You turn 58: Your PF account becomes inoperative; earns no interest.
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