Employee Provident Fund (EPF) is an important part of building retirement savings for salaried employees. A part of your salary goes into your PF account every month, while your employer also makes a contribution towards it.
Individuals who switch careers or move to a job where EPFO-managed provident fund is not applicable may stop making regular contributions to their PF account. Similarly, the employer also stops their contribution towards both EPF and EPS.
The employee generally contributes 12% of their basic wages plus dearness allowance to EPF, while the employer also contributes 12%. Of the employer’s contribution, 8.33% is typically diverted towards the Employees’ Pension Scheme (EPS), and the remaining portion goes towards the worker's EPF account.
When you leave your salaried job or become self-employed, you no longer have an employer making provident fund contributions on your behalf. The same thing applies to those who move to a job where EPF is not applicable.
For example, if you leave your job and start working for a foreign client that does not provide EPF, stop working altogether or start your own business, you may no longer be covered under the Employees Provident Fund Organisation (EPFO).
Since EPF contributions are linked to to an employer-employee relationship, you cannot continue making regular mandatory employee and employer contributions to your EPF account on your own.
However, your existing EPF balance does not disappear in any of the above mentioned scenarios. The accumulated amount remains in your EPF account and can continue to earn interest until a certain period,
EPFO continues to credit interest in your account even after you stop working or leave your job, until you turn 58 years old, according to the central retirement fund body's FAQ section.
The current EPF interest rate is 8.25% per annum for the financial year 2025-26. This interest is credited in the member's account on a yearly basis. Meanwhile, EPS being a pension scheme does not earn any interest and the pension is calculated based on the average monthly salary of the last year of service multiplied by the number of years of service divided by 70.
If you are permanently moving to self-employment or stop working altogether, you may need to consider other retirement-saving options for your future contributions and social security.
Some options include the Public Provident Fund (PPF), National Pension System (NPS), Senior Citizen Savings Scheme (SCSS) or other suitable investments, depending on your financial goal and risk parameter. However, it's prudent to check whether you qualify for these savings schemes or not.
Employees are advised to regularly check their EPF passbook and look for gaps in their monthly contributions. They should also check whether their employment and pension service details are correct.
This is because missing EPF contributions can result in a lower PF balance and, consequently, lower interest earnings over time. Without fresh contributions, the amount available for compounding also grows more slowly, which can reduce the overall retirement corpus.
If you make any EPF withdrawals before completing five years of continuous service, then the amount is generally treated as taxable under Rule 6 of Schedule XI of the Income-tax Act, 2025.
The tax treatment applies unless the withdrawal falls under specific exemption categories recognised under EPFO and income tax rules.
