Many people change jobs every 2-3 years to get higher salary and better opportunities. However, amidst the enthusiasm of salary hike, people often overlook one important task which can result in heavy taxes as well. We are telling to merge Provident Fund (PF) account.
New Delhi. Financial advisors always advise that PF amount should not be withdrawn before retirement. The government has also made rules in such a way that the employee withdraws this fund only after retirement so that he does not face any kind of financial problems after the job. But in some special circumstances, PF Amount can be withdrawn earlier also. Taxes also have to be paid for withdrawing PF money in between. Know what are the rules of work related to it.
According to the Employee Provident Fund Act 1952, 12 percent of the basic salary of the employee goes to PF. The rule of EPFO says that if you have worked continuously for 4.5 years with the old employer, then on getting a second job, you can transfer the entire amount of your PF account to the account opened with the new employer. If the employee withdraws his money from the old account after the new PF account is opened, then it is also exempted in the Income Tax Act and no tax will have to be paid on this amount.
It is necessary to merge PF account
When you start a new job, you get a Universal Account Number (UAN) from the EPFO (Employees’ Provident Fund Organisation). Your employer opens a PF account under this UAN, both you and your company contribute to it every month. When you change jobs, you provide your UAN to the new employer, who then opens another PF account under the same UAN. It is necessary to merge your previous PF account with the new account opened later.
When to pay tax
If withdrawal is made from your PF account after 5 years then it is completely tax free. If the withdrawal is made before 5 years, then it becomes taxable. If the money is withdrawn from the provident fund before 5 years and the subscriber’s PAN card is not linked, then 20 percent will be deducted. On the other hand, if your PF account is linked to PAN, then TDS will be deducted at 10%.
These people do not have to pay tax
If the employee has to leave the job due to ill health or the business of the employer has stopped or the job has been lost due to any reason beyond the control of the employee, then no tax will have to be paid on withdrawal of money from PF in these cases. If the employee has changed the job and transfers the money from the old account to the PF account opened with the new employer, then in this case also he will not have to pay any tax.
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