Inoperative EPF Accounts With Small Balances Set For Automatic Refunds: Labour Ministry

The employee provident fund (EPF) accounts with balances of up to Rs 1,000, lying unclaimed due to inoperability, will soon be closed, and the balance will be transferred to the accountholder’s Aadhaar-linked bank account without any document submission formality. The Labour Minister Mansukh Mandaviya announced this on February 23, 2026. The Minister said that this amount will be directly credited to the inoperative EPF account subscribers’ Aadhaar-linked bank accounts.

The initiative is to reduce the amount lying unclaimed in the inoperative EPF accounts, refund it to the subscriber, and keep only active accounts in the system.

When Does An EPF Account Become Inoperative?

According to the EPFO website, when there is no contribution in the EPF account for consecutive three years, and the subscriber doesn’t withdraw the amount despite being eligible for final settlement, the account is converted from being an active account to an inoperative account.

“An account is classified as an Inoperative account in which contribution has not been received for 3 years after retirement or permanent migration abroad or in case of death”, read the EPFO FAQs.

In short, under three conditions, including when a person retires, permanently settles abroad, or in case of death, the account needs to be closed after final settlement. But when the final settlement, say final withdrawal, is not done, the account is converted into an “inoperative” account after a waiting period of three years. Once tagged as inoperative, it stops earning interest, and funds cannot be withdrawn without submitting the necessary documents or fresh KYC, etc.

However, the latest announcement is a step in this direction to make the process easy for subscribers whose EPF accounts have a small balance of up to Rs 1,000.

What To Do If Your EPF Account Becomes Inoperative?

Working employees who have switched to a new organisation should get their accounts transferred to the new employer. They can do it online or offline. For retirees, the only option is to close the account and withdraw the money. The EPF account then automatically gets closed without further formalities.  

Per the reports, there are around 31 lakh inoperative EPF accounts with approximately Rs 10,900 crore lying in them, of which six lakh accounts have a balance of not more than Rs 1,000. With this refund initiative, around Rs 30 crore that is lying in the accounts with a small balance will be settled.