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In a relief to claimants of more than Rs 27,000 crore funds lying inactive in the Employees Provident Fund Organisation (EPFO), the union government has decided to credit interest on claims if the settlement takes more than 30 days.
The move will ensure that salaried employees whose accounts have become inoperative in EPFO are able to avail the benefit of interest rate on the funds as a result of delay in settlement. It is mandatory for the retirement body to settle the claims and payments of EPFO subscribers within 30 days. At present, the EPFO gives 8.75% interest rates on the funds.
If an EPFO subscriber doesn’t make contribution to his account for more than three years continuously, his account becomes “inoperative.” At present, Rs 27,448 crore is lying in inoperative accounts of the EPFO as on 31st March 2014.
“If the settlement of claim in respect of inoperative account is delayed for more than 30 days from the date of receipt of the application for settlement of claim, interest shall be credited to the account for delay period excluding the period of thirty days,” stated a Ministy of Labour and Employment notification dated December 12 reviewed by Business Standard.
This step was taken after it was found that the EPFO was taking time beyond 30 days to settle the claims of inoperative accounts as it involved a multi-level verification to reduce the risk of fraud.
Earlier, the union government had stopped crediting interest rates in the inoperative accounts of EPF subscribers from 1 April 2011.
The earlier move meant that if the employee under EPFO has not withdrawn or transferred his funds after switching job for 36 months, no interest rate will be credited to the account of a member from the first day of it becoming inoperative i.e. from the 37th month.
According to the present norms for settling claims in such inoperative accounts, the employer has to attest the claim form of his employee. In case, the employer fails to identify the member, the claim has to be attested by the bank authorities along with verification of a Know-Your-Customer (KYC) document.
In cases where the settlement amount is beyond Rs 50,000, the claims are approved by Assistant Provident Fund Commissioner. In cases where settlement amount below Rs 50,000, the claims are approved by Account Officer.
The inoperative accounts have definite claimants and the amount lying in the inoperative account cannot be utilised for any other schemes except for the settlement of the members’ account.
“The members after switching over from one covered establishment to another do not get the funds transferred to their present account. As a result, the old account becomes inoperative after 36 months,” union labour minister Bandaru Dattatreya had said in a written reply to the Lok Sabha on December 1 this year. Dattatreya also said that the interest earned on the deposits with EPFO is exempted from Income Tax. Therefore, there exists a tendency of leaving the balance amount with EPFO.
