Why should you transfer PF account while changing jobs?

Why should you transfer PF account while changing jobs?

The main reason why we should transfer money from the PF account when changing jobs is that if we don't, the money in the account may get taxable.

According to the Indian laws, the money from a PF account is tax-exempt only if the employee has served at least 5 years under the same employer. In case the worker transfers his job in between, then he must transfer his PF account to his new employer and the period he worked with the previous employer will be incorporated with the period of his new service and it will considered as continuous employment for taxation purposes.

So if you have worked for an establishment for less than 5 years and failed to transfer the account, the PF amount will be taxed on redemption.

As of April 2011, the government has stopped paying interest to EPF accounts that are dormant.A dormant account refers to an account that has had zero contribution for more than 3 years. If you have 1 Lakh in your account, it could double in 10 years, assuming the interest stays constant at 8.5%. So, if you don't keep your account active, you could end up losing potential income.

Another reason to keep an active PF account is that if you find yourself unemployed or in dire need of money, you can withdraw from your PF account using Form 19. If you withdraw more than 50,000 before completing five years of continuous service, you will be taxed at 10%. After the specified period, the withdrawal will be tax-free.

How to change a PF account?

When you open a PF account, you are issued an unique number called Universal Account number (UAN). If you shift your jobs, you just have to declare your UAN number to your employer so that he can continue using the same account instead of a new one.

If you have already joined a new employment and failed to do so, then you can transfer the money from the old account to your new one either online or offline. If you are shifting your account online, you will require your former employer's digital signature. Alternatively, you can fill out the EPF transfer form and submit it to your current employer, who will contact your former employer to finish the process. 

 

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