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How will your salary increase if you do not change job? This is a line which is heard in almost every office. Many people change jobs every two to three years to increase salary and get better opportunities. But while changing jobs and enjoying increased salary, people often forget to do one important task, as a result of which they have to pay huge taxes.
We are talking about merger of PF accounts. As soon as you start a job, you get a UAN i.e. Universal Account Number from EPFO. Your company opens your PF account under this UAN. Every month your and your company's PF contribution is deposited in the same PF account in your name.
When you change jobs and give your UAN to the new company, the company opens another PF account under that UAN. After this, your and the new company's PF contribution starts getting deposited in that new account. It is important that after opening a new PF account, you merge the earlier account with the new account.
What are the rules for PF withdrawal?
According to the rules, if you have worked in a company for less than five years and the money deposited in your PF is less than Rs 50,000, then you will not have to pay any tax while withdrawing it. Whereas if the amount is more than Rs 50 thousand then you will have to pay 10 percent TDS. If you have completed five years then you will not have to pay any tax on withdrawing PF.
What will happen if PF is not merged?
If you merge your PF accounts then the UAN will merge all your work experience. Meaning, if you have worked in three companies for 2-2 years and you have merged your PF accounts, then your experience will be six years. But if you have not merged the PF then the period of each company will be counted separately. Therefore, if you withdraw money from your PF account without merging, then each company will have a separate account for two years and you will have to pay 10-10 percent TDS on all three.
Suppose you worked in X company for two years, where Rs 55 thousand are deposited in your PAF account. While you worked in Y company for two years, you got Rs. You have Rs 60 thousand deposited in your PF account and you worked in Z Company for two and a half years, there you have Rs 60 thousand. Rs 75 thousand will be deposited in your PF account. If you keep your PF accounts merged, then by combining X, Y and Z, the UAN will count your total work of seven and a half years and you will be able to withdraw the entire Rs 1 lakh 90 thousand without paying any tax. Whereas if you have not done the merger then you have not completed five years in any company. In such a situation, you will have to pay 10-10 percent tax separately in all three. Meaning you will get only Rs 1 lakh 71 thousand. That means a loss of Rs 19 thousand.
What is the process of merging PF accounts?
– Log in to the integrated portal of EPFO with your UAN number and password.
– After logging in, go to online services. There click on 'One Member-One EPF Account (Transfer Request)'.
– Verify your personal details and PF account of your current employer.
– After this, if you click on Get Detail, the list of your old employers will open.
– Here click on the account you want to transfer.
– After this click on Get OTP, OTP will come on your registered number, enter it and submit.