Changing jobs frequently can lead to the creation of multiple Provident Fund (PF) accounts, as a new PF account is opened with each new employer while the previous ones remain active. This situation may cause complications in managing your PF balance and tax liabilities when withdrawing funds.
Why merge PF accounts?
Merging your PF accounts consolidates your entire balance under a single account, ensuring that interest is calculated accurately and consistently. It also simplifies the withdrawal process and helps avoid potential tax complications arising from having multiple accounts.
How to merge PF accounts?
Every employee is assigned a unique Universal Account Number (UAN) which remains permanent throughout their career. To merge PF accounts, update your KYC details on the EPFO portal first. Then, submit Form-13 to transfer the balance from your old PF account(s) to the current one. After the transfer, the old accounts will show zero balance but will remain in the records.
Tax implications on PF withdrawals
Withdrawals from PF accounts are tax-free if you have worked continuously for five years or more. However, if the total service period is less than five years, withdrawals may attract Tax Deducted at Source (TDS) and income tax. Not merging multiple PF accounts and withdrawing separately can increase your tax liability.
Key advice for employees
Since a new PF account is automatically created with each job change, it is important to initiate the merger process promptly through the EPFO website or mobile app. Avoid premature withdrawal of PF funds before completing five years of service to prevent unnecessary taxes. Consolidating your PF accounts helps protect your savings and strengthens your retirement corpus.
In summary, merging your PF accounts at the earliest is essential to safeguard your accumulated funds and avoid tax issues. Timely merging and prudent withdrawal planning will help maximise your retirement benefits.
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