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Market Intelligence › Basic Terminologies
Employee and employer contributions, interest, and the rules for withdrawal
Published by The Retail Trader · JUL 22, 2026 · Retirement & Insurance
There is a PF line on the salary slip that most people see only as a deduction. It is your own money, and for many people it becomes their largest retirement asset.
A fixed percentage of your basic salary is deducted from you, and the employer puts in the same amount. A part of the employer's share goes into the pension scheme, and the rest into EPF.
The whole corpus earns interest every year at a declared rate, and that interest is also added back into the corpus. This same compounding keeps running for several decades.
This is the turning point where the most damage happens:
• You should transfer the account, not withdraw — this is done online through the UAN.
• Withdrawing wipes out the entire future benefit of compounding.
• Withdrawal before a certain number of years can also attract tax.
• An inactive account also has its own rules for interest.
Withdrawing PF at every job change is a small convenience with a very long price. That money is often taken out at the age when it has the most years left to grow.
This article is for education only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.