Indian Government makes another amendment to the provident fund (PF) regulations

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Amendment to PF

• In the last two years, the Government of India has been making series of changes to the provident fund regulations.

• After inclusion of international workers (IWs) into the PF net, and also restricting their withdrawals, the Government of India, has made another change whereby it proposes to discontinue payment of interest on inoperative PF accounts.

• At present, even inoperative PF accounts are entitled to interest payment. In September 2010, Ministry of Labour proposed to increase the rate of interest from 8.5% per annum to 9.5% per annum.

• In terms of the amendment, a PF account will be regarded as inoperative if no application is made for withdrawal or transfer of balance within thirty six months from the date on which it became payable to the member. These inoperative PF accounts will not fetch any interest from 1st April 2011.

• PF account balance is payable to a domestic worker upon he/she ceasing employment/retirement/death. Domestic workers who do not make application for withdrawal/transfer after such an event will not be entitled to any interest once the accounts become inoperative.

• In the case of IWs accummulated PF balance is payable on retirement after attaining 58 years. Under the existing PF regulations, repatriated IWs have to retain their PF account in India until they attain 58 years. It is not clear whether the amended PF regulation could treat the repatriated IW PF accounts (which may not be operative for over thirty six months) as inoperative thereby depriving them of interest.