Members of Employees’ Provident Fund (EPF) will now get more money as the interest on the accumulated balance will be paid to them up to the date of final settlement. At present, for final claims settled till the 24th of the month, interest is paid only up to the end of the preceding month causing members to lose quite a substantial amount.
The Central Board of Trustee has approved amendment to paragraph 60(2)(b) of the EPF Scheme, 1952. The new rules will come into effect after the government issues the Gazette notification.
So, a member retiring with an accumulated balance of Rs 1 crore and applying for final withdrawal on the 20th of a month will get an additional interest for the 20 days amounting to Rs 44,355 (at an interest rate of 8.25% fixed for FY25). Similarly, a member retiring with an accumulated balance of Rs 2 crore and applying on the 20th of a month will get an additional interest of Rs 88,710.
Final withdrawal
The proposed amendment will be applicable on withdrawal of full EPF amount by the members in case of retirement from service after attaining the age of 55 years, retirement due to disability, for taking employment abroad and closure of the EPF account after two months of unemployment. The new rules will not be applicable for partial claims or withdrawals for education, marriage, house building advance etc.
Moreover, currently, interest-bearing claims are not processed between the 25th and the end of each month leading to delay in settling the claim. After the changes in norms, claims will now be processed throughout the month, which will help reduce members’ grievances.
Inoperative account
After retirement, if there is no application for withdrawal the account will continue to be operative for three years and interest at the prevailing rate will be paid each on the total corpus for three years. After that, it will become inoperative and interest will not be credited to the account.
Interest earned on the EPF corpus is exempt from tax (subject to certain conditions) only if there are active contributions to the EPF account. “Any interest credited to an EPF account after retirement is taxable in the hands of the member,” says Puneet Gupta, tax partner, EY India. The tax will be applicable at the marginal rate of the member.
» Read More
