Merging your PF accounts means your UAN will consolidate all of your work experiences.
When you turn jobs, you present your UAN to the brand new employer, who subsequently opens one other PF account beneath the identical UAN.
Many of us change jobs each 2-3 years to safe increased salaries and higher alternatives. However, amid the thrill of a wage hike, folks usually overlook an important activity that can lead to hefty taxes. We are referring to the consolidation of Provident Fund (PF) accounts. A Provident Fund is an compulsory retirement financial savings program administered by the federal government and carried out in Singapore, India, and varied different rising nations. It entails contributions from each the worker and the employer, intending to supply monetary help to workers upon reaching retirement age. The fund’s major goal is to make sure that people have a steady supply of earnings throughout their retirement years.
When you begin a brand new job, you obtain a Universal Account Number (UAN) from the EPFO (Employees’ Provident Fund Organisation). Your employer then opens a PF account beneath this UAN, and each you and your organization contribute to it each month. When you turn jobs, you present your UAN to the brand new employer, who subsequently opens one other PF account beneath the identical UAN. Consequently, your new employer’s PF contributions are directed to this new account. It is important to merge your earlier PF account with the brand new one after opening the latter.
Rule of PF withdrawal
As per the laws, in case your tenure with an organization is lower than 5 years and the overall deposit in your PF account is beneath Rs 50,000, you’re exempted from paying any taxes upon withdrawal. However, if the quantity exceeds Rs 50,000, a ten per cent Tax Deducted at Source (TDS) will likely be relevant. Conversely, when you’ve got accomplished 5 years of service, no tax will likely be levied on the withdrawal of your PF funds.
Consequences of not merging PF accounts:
By merging your PF accounts, your UAN will consolidate all of your work experiences. This implies that when you’ve got labored for two years in every of three totally different corporations and have merged your PF accounts, your complete expertise will likely be calculated as six years.
However, if you don’t merge your PF accounts, the period of every firm will likely be thought-about individually. Consequently, in the event you determine to withdraw funds out of your PF account with out merging, every firm’s two-year period will likely be handled individually, leading to a ten per cent TDS deduction for every.
