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When changing jobs, if an employee withdraws money from his old organization’s Provident Fund, he will make a big mistake. If the employee’s PF is not five years old and is withdrawn, then, income tax needs to be paid on the anmount.  The money withdrawn from PF before completing 5 years of service is added to the annual income. Tax has to be paid on this amount according to your tax slab

If an employee wants to avoid paying tax, he will have to keep his PF account active. As soon as he joins a new organisation, the new company will start depositing money in his PF account. Gagan’s Universal Account Number or UAN will remain the same. But, there will be two accounts displayed in his PF account. So when changing jobs, provide the UAN to the new employer and your old account can continue to be active. A salaried person has only one UAN. This account will continue to operate until retirement.

Please note that your old account balance will not be linked to your new account. The contribution from your previous employer will continue to be shown separately. Therefore, employees will have to merge their old and new accounts to add the  fund lying in the previous account to the new one.

The process of merging PF accounts can be completed online. Once the account is merged, you will be able to see the entire amount and earn interest on large sums. There will be no need to log in separately for different accounts. Plus, you will not be required to update different accounts. Having a large sum in one account will also make it easier to withdraw  money in future. Understand the entire process step by step, how a PF account is merged:

To merge PF accounts, first go to the official EPFO portal epfindia.gov.in.  Now click on online services. select ‘One Member-One EPF Account’ tab. Your personal information will be displayed on the screen. Enter your previous organisation’s member ID, old PF account number, and UAN. Then click on the Get Details option. Now enter the OTP and proceed, your request will be submitted. After verifying EPFO data, your account will be merged. After this, you can see the total deposited amount in a single PF account.

PF is beneficial in accumulating a large fund for retirement. A part of your earnings is deposited into the PF account. With this amount, the salaried employee receives lump sum at retirement. He then receives a fixed amount every month as pension under the Employee Pension Scheme or (EPS-95). This pension will be given for life. However, it is necessary that contribution is made  for 10 years in the PF account. Only then, after the age of 58, the pension will be given. Those who withdraw the entire amount from the PF account before completing ten years do not get the benefit of  pension. If the amount is withdrawn within four years, there will be a break in the PF account. After switching to the next job, the employee will again have to complete the 10-year cycle.

Among all the investment options available in the capital market that gives a guaranteed return, the provident fund is the best option. Currently, it gives an interest rate of 8.1% and is tax free. There is no better plan for retirement than this one!  Therefore, you should make every possible effort to avoid withdrawing money from this account repeatedly to make your post-retirement life a happy one.