India's EPFO to offer interest on inoperative accounts
From the new financial year which will begin April 2016, employees in India will earn interest on inoperative accounts. Employees' Provident Fund Organization (EPFO) has decided to offer benefit of accrual of interest on inoperative accounts. The Central Board of Trustees of EPFO has decided in favor of inoperative account holders in giving benefit of interest. The latest decision is effective from 1 April 2016.
Reversing the decision in 2011 to not to give interest on inoperative accounts, the Narendra Modi-led government has decided to give benefit of accrual of interest. Then UPA-II government had taken decision not to give any interest on inoperative EPFO accounts.
The Economic Times reports that the latest decision of EPFO will benefit nine core inoperative accounts of subscribers switching jobs. Employees' Provident Fund Organization has estimated that more than INR 30,000 crore has been held over in inoperative accounts. If there's no contribution from either the employee or employer for 36 months, then EPF accounts will be considered as inoperative accounts.
Union Labour Minister Bandaru Dattatreya has confirmed the decision to offer benefit of interest on inoperative accounts, after participating in the 212th meeting of the board of trustees of EPFO on March 29. Dattatreya said "We have taken a pro-worker decision to give interest on inoperative accounts with effect from 1 April 2016."
NDTV Profit further adds that in the Economic Survey for 2015-16, more than nine crore with about INR 44,000 crore deposits are lying out of the total 15 crore employee provident fund (EPF) inoperative accounts. EPFO has also imposed restrictions on withdrawal process. With the latest rules framed by the Ministry of Labour and Employment, a person who's unemployed for more than two months can withdraw money only from his contribution and interest earned on it. Employer's contribution and interest can only be withdrawn after 58 years of age.
Earlier, the UPA-II government had taken the decision not to give benefit of interest on inoperative accounts persuading employees to withdraw their money and merge with active accounts.
The Union Ministry of Labour and Employment has estimated that there're 40 million active accounts and about 90 million inactive accounts in India. Out of the 90 million inactive accounts, about 40 million are inoperative accounts. An EPFO notification on 25 February imposed some restrictions on EPF withdrawals, as reported by LiveMint.
Dattatreya said "A small committee under the CPFC (Central Provident Fund Commissioner) will address all anomalies in a month's time, after which the exercise will start."
The Board of EPFO has also given an in-principle approval on restructuring of the organization. A sub-committee has been setup on restructuring EPFO and subsequently, the committee has submitted its report.