Whenever we talk about withdrawal of Employee Provident Fund, a lot of people ask various questions regarding the problems that they face during there attempt for the withdrawal of there EPF in real time. Here in this post I will try to discuss the different problems and there solutions which will help you through your EPF withdrawal decision & process.
When Your EPF Account Will Become Inactive & Stop Earning Interest?
Your Employee Provident Fund (EPF) account will become inactive if:-
- Your company for any reason stop putting money to your EPF account or,
- You discontinue your job for further study or business etc.
- You switch your job and your new company do not have a EPF facility.
- You don’t opt for EPF contribution.
If due any reason your EPF account becomes inactive and stays like that for three continuous years then the money invested in EPF account will not get any interest (i.e 8.6% interest for 2012-13). Which means EPF will pay interest for first 3 years to an inactive EPF account, but not later on.
Weather You Should Keep Invested In An Inactive EPF Account Or Transfer Your Amount To Some Other Scheme?
If you have moved out of your job for higher education, business or to a new company where EPF facility is not available then you cannot transfer your EPF account. Which means your employer is no more going to add funds to your EPF account. In that case you can keep invested for a period of 3 years as you will get interest on your inactive EPF account for the first 3 years. But after that it is better for you to withdraw your EPF balance and invest in some other investment scheme as you wont get any interest on your EPF amount after 3 years.
What Is The Right Time For The Withdrawal Of Employee Provident Fund (EPF)?
Although the fund invested in EPF is meant for retirement so the right time of withdrawal of EPF fund is at the time of retirement. But looking at the current scenario, we call right time for the withdrawal of funds when we wont be taxed on our money invested. So taking that in consideration lets have a look.
Withdrawal of funds from EPF account will attract tax if the withdrawal is made before 5 years of service. In simple words, if you as an employee work in one or more companies where you contribute in EPF then your withdrawal i.e principal and interest will be exempt from tax if you have rendered 5 years of service before your withdrawal.
Can You Avoid Tax By Transferring Your EPF Funds?
Yes, if you are switching your job before 5 years then you can transfer your EPF account from your old employer to new employer. Withdrawal of EPF after rendering 5 continuous years of service do not attract any tax.
But if you want to transfer your EPF fund from EPF scheme to some other scheme before compilation of 5 complete years then you wont be able to save your tax.
What Is Unclaimed Deposit Account? How To Withdraw EPF Fund From Unclaimed Deposit Account?
If an inactive EPF account wont be claimed 3 years then the amount gets transferred to an Unclaimed Deposit Account. To withdraw money from Unclaimed Deposit Account, EPF department usually ask for an Affidavit cum Indemnity bond on Rs 100 Stamp paper along with with other documents for the withdrawal of funds. Find below the format for Indemnity bond:-
I Shri / Smt. ————————————————————– Age yrs.
residing at ————————————————————————————-
Solemnly affirm that
- I was working in M/s ——————————— from ——– to ————— and I was member of P.F. bearing A/c No. ——————-.
- I left the service on ———————–.
- I have not withdrawn the P.F. dues due to ———————————– till today.
- I have opened my Bank A/c with ————————— A/c No. —————— On ————-and still it is not closed.
- I indemnify to the Central Board of Trustees, Employees Provident Fund Organization against any loss and wrong payment which may be sustained by Payment of P.F. and E.P.F. dues to me.
This affidavit- cum – Indemnity Bond signed by me before 1st class Magistrate on this ——————– day of —————–year.