Inoperative EPF accounts will now earn interest - Notification issued on Nov. 11, 2016

Here is a good news! Now inoperative/inactive EPF accounts will also get interest. That means now you can keep your money parked in EPF and keep earning the interest even when you are no more working (as a salaried employee). In a notification issued on November 11, govt. has declared that interest (which currently is 8.8%) will be computed and paid from 1 April, 2016.

Inoperative PF accounts are those accounts where there is no contribution made for continuous 3 years. Let us understand how these accounts have done over the years in terms of interest payouts.

Inoperative PF Accounts Time-line

Before 2011 - There was no concept of inoperative accounts. Every PF account used to earn interest.

2011 - 2016 - In 2011, govt. declared that accounts which are not getting any contributions for continuous 3 years will become inoperative and will stop getting interest. This was done to encourage the transfer of EPF balance from old account to new account. The transfer process was cumbersome at that time so people used to open a new PF account in a new job rather than transferring. This rule forced people to transfer their old account before it got inoperative.

April, 2016 onwards - Inoperative accounts started getting interest. With the introduction of UAN, EPF transfers have become easy and transparent so there remained no need of the above 2011 rule. Govt. decided to pay interest on inoperative EPF accounts too.

It is a welcome step for all of us but with one potential side effect. The EPF interest rates are expected to fall slightly in coming times as EPFO will distribute this additional outgo (of interest) to every EPF member.

Category: finance