PF Account : Changing jobs is common these days, but this can lead to a major problem: the creation of two PF accounts. When an employee joins a new company, a new PF account is opened, while the old one remains active. This results in the employee having two or more PF accounts. If these are not merged in time, it could lead to future withdrawal and tax issues.
Why is PF account merger necessary?
Merging your PF accounts keeps your entire balance in one place and ensures consistent interest payments. Keeping separate accounts can create difficulties in interest calculation and withdrawals. Furthermore, merging is beneficial from a tax perspective.
PF account merger process
– Each employee receives a UAN (Universal Account Number), which is permanent.
– It’s important to update your KYC by going to the EPFO portal.
– After that, you can transfer the balance from your old account to the new one by filling out Form-13.
– Once the accounts are merged, the old account will be empty but will still show up in the records.
Tax rules: When are PF withdrawals tax-free?
– If you’ve worked for 5 years or more, your PF withdrawal is completely tax-free.
– However, if your service is less than 5 years and you withdraw your PF, TDS and income tax might apply.
– If you don’t merge your accounts and withdraw from different ones, you could face a higher tax burden.
Important advice for employees
– A new PF account is set up as soon as you switch jobs, so make sure to start the merger process right away.
This can be easily done through the EPFO website or mobile app.
– Try to avoid withdrawing your PF before 5 years to steer clear of taxes.
– By merging your funds, you keep your money safe and strengthen your retirement savings.
Merging your PF accounts is a vital step for every working person. It not only safeguards your money but also helps you dodge tax issues. Merging at the right time and making wise withdrawals can boost your retirement fund.