EPF accounts will now accumulate interest till the date of the final settlement. Presently if the final claim is settled till the 24th of the month, interest is paid only till the end of the month before final, causing members to lose money.

The Central Board of Trustees of EPFO 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.

After the change is implemented retiring members with an accumulated balance of Rs 1 crore and applying for final withdrawal on the 20th of a month will receive an additional interest of Rs 44,355 for 20 days at an interest rate of 8.25% fixed for FY24, and Rs 88,710 for a member with an accumulated balance of Rs 2 crore.

Final Withdrawal

The proposed amendment will apply to members withdrawing their full EPF amount after reaching 55 years of service, retirement due to disability, taking employment abroad, and closing the EPF account after two months of unemployment.

The new rules will not apply on partial claims or withdrawals for education, marriage, or house building advances. Interest-bearing claims will now be processed throughout the month, reducing members' grievances and improving the overall processing process.

Inoperate Accounts and Tax Benefits

After retirement, if there is no withdrawal application from an account, the interest will be paid for up to three years. After three years the account will become inoperative and interest will no longer be credited.

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. The tax will be applicable at the marginal rate of the member.

If a member continues to work even after the legal age of retirement, the contribution to EPF will continue. However, the contribution to Employees’ Pension Scheme (EPS) will discontinue and both the employer and employee’s contribution will be deposited to the EPF account.

The Employees Provident Fund (EPS) is a pension pool that transfers 8.33% of an employer's contribution, capped at Rs 1,250 a month, without interest. It offers a pension upon 10 years of unbroken contribution, with the pension disbursed upon turning 58.

Members can receive a tax-break of up to Rs 1.5 lakh under Section 80C for EPF contributions. Employees can also contribute up to 100% of their basic salary and DA to the Voluntary Provident Fund (VPF), which has the same interest rate and tax-free returns as EPFs.

Employee contribution income above Rs 2.5 lakh is taxed, with a limit of Rs 5 lakh when employers don't contribute. Pensions are calculated using a formula: number of years of contribution multiplied by average salary of the last five years before retirement, divided by 70. For example, if an employee contributes 35 years to EPS, they will receive a maximum pension of Rs 7,500 a month, with a minimum monthly pension of Rs 1,000.