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What Happen to your EPF Account After Gaining NRI Status?

Many of us may find ourselves in a situation where we have to leave India for work or other reasons, which can give rise to a lot of questions about how our investments will be affected. One such investment is your Employees’ Provident Fund (EPF) account, which is an important retirement savings instrument. But what happens to your EPF account after gaining non-resident Indian (NRI) status? 

In this article, we’ll look at the various rules and regulations applicable to EPF accounts in the case of NRI status, as well as strategies that you can use to optimize your returns from the fund.

What is EPF Account?

If you are an Indian citizen who has been working in another country for more than a year, you are considered an NRI (Non-Resident Indian). Once you become an NRI, you are no longer eligible to contribute to your EPF (Employee Provident Fund) account. However, your EPF account will continue to grow, and you can withdraw the funds once you return to India.

EPF is a retirement savings plan that is mandatory for all employees in India. Employees contribute a portion of their monthly salary to their EPF account, and employers match this contribution. The funds in the EPF account can be used for several purposes, including buying a house or starting a business.

Once you become an NRI, you are no longer required to contribute to your EPF account. However, your employer may continue to contribute if they choose to do so. If you have any outstanding loans against your EPF account, you will need to repay these before you can withdraw the funds.

You can withdraw your EPF balance after you return to India or when you reach the age of 55 (whichever is later). If you withdraw the funds before 5 years of becoming an NRI, there may be some tax implications. Therefore, it is advisable to consult with a tax advisor before making any withdrawals from your EPF account.

EPF Account and NRIs

If you have been an NRI for more than 5 years, then your EPF account will be transferred to the inoperative accounts section of the EPFO. You will not be able to claim your EPF balance until you become a resident Indian again. The government has made it easier for NRIs to claim their EPF balance by allowing them to submit their KYC documents online.

If you have been an NRI for less than 5 years, then your EPF account will remain active and you can continue to contribute to it. You can also withdraw your EPF balance after completing 5 years of continuous service.

Relocation While Employed with an Indian Company

If you are employed with an Indian company and relocate to a foreign country, your EPF account will continue to remain active. You will be required to submit a declaration to the EPFO office regarding your new foreign address and contact details. Your employer will also need to notify the EPFO of your change in address. Contributions towards your EPF account will continue to be deducted from your salary and deposited into the account. However, you will not be able to access or withdraw these funds until you return to India and regain your resident status.

Things to Remember

There are a few things to remember when it comes to your EPF account after you have gained NRI status:

  • Your EPF account will continue to earn interest and accumulate funds even while you are an NRI.
  • You can make withdrawals from your EPF account after you have attained NRI status, but there are certain conditions and rules that must be followed.
  • If you do not make any withdrawals from your EPF account for a period of 3 years after becoming an NRI, then your account will be considered as inactive and some penalties may apply.

Thus, it is important to keep these things in mind when dealing with your EPF account after gaining NRI status.

Benefits

There are several benefits of having an EPF account even after gaining NRI status. 

  1. The account holder continues to receive the benefits and interest accumulated in the account till the time they were an Indian resident – This means that even if you move abroad, your EPF account will continue to earn interest and be available to you when you return to India.
  2. Can act as a retirement fund – This is because the money in your EPF account can be withdrawn only after you turn 60 years old. Therefore, if you want to use your EPF savings for retirement, you can do so without any restrictions.
  3. Keeping your EPF account active also has tax benefits – This is because the interest earned on your EPF balance is tax-free. Therefore, if you are an NRI with an active EPF account, you can enjoy these benefits even while living abroad.

Pros to EPF account after gaining NRI status?

There are a few pros to having an EPF account even after gaining NRI status. 

First, you can continue to contribute to your EPF account if you wish, and your contributions will still be eligible for tax benefits. 

Second, you can withdraw your EPF balance after returning to India, provided you have been an NRI for at least 3 years. 

Finally, if you have completed 5 years of service, you can withdraw your entire EPF balance without any restrictions.

Cons to EPF account after gaining NRI status?

If you’re an Indian citizen who has been working in India and contributing to the Employees’ Provident Fund (EPF), you may be wondering what will happen to your EPF account once you gain non-resident Indian (NRI) status.

Unfortunately, there are a few cons to having an EPF account after gaining NRI status that you should be aware of before making the decision to leave India.

First and foremost, if you’re an NRI, you are not allowed to make any more contributions to your EPF account. This means that your EPF balance will remain the same as it was on the day you left India, even if you continue working and earning an income abroad.

Secondly, NRIs are also not allowed to withdraw from their EPF accounts until they reach the age of 60. So if you need access to your funds for any reason before then, you’ll have to wait or close your account and take the withdrawal as a lump sum.

Lastly, another downside of having an EPF account as an NRI is that you won’t earn any interest on your balance after leaving India. The interest rate on EPF accounts is reset every year based on the current inflation rate in India, so even if the interest rate goes up while you’re away, you won’t benefit from it. 

After you gain NRI status, your EPF account will be credited with an amount equal to your EPF contribution and interest. This amount will be deposited in your NRE account.