Your provident fund is your social security. When you switch jobs, make sure you update your PF account also
THE ONLY thing constant in life is change. Golden words. But it’s one stark reality that you may have to face one day. Harsh Mehta, a middle-level executive, was in a similar state of mind while handing over his resignation letter. For the 36-year-old, who worked for more than a decade in the company, it was an emotional moment, since this was the place from where he started his career. Mehta, in need of funds, decided to withdraw money from his provident fund account, little realizing the implications of the decision. A year down the line, Mehta, unable to perform in line with the expectations of the new firm was thrown out of the job. The old company refused to reinstate him. He was caught off guard. He took up a job in a little-known company at a much lower salary to support his family. Most people in India don’t realize the importance of a PF account. Here’s a lowdown on what you should know when you withdraw or transfer your PF account.
FIRST THINGS FIRST
Tax planners advise that as a priority you should immediately furnish your PF account number, as registered with your previous employer, upon joining a new employer. This ensures that your accumulated balances – Employees Provident Fund (EPF) and Family Pension Scheme (FPS) – are brought forward in the same PF account number and fresh contributions get added thereto. However, in case you need to transfer the accumulated balances to the fresh PF account with the new employer, you need to submit Form 13 to the PF department through your current employer.
Currently, efforts are underway by the PF office to provide an unique Social Security Number (SSN) to every salaried person. After this, no employee will be allotted multiple PF account numbers. As the salaried person, you will have to provide this social security number to your new employer and the accumulated balances in the EPF account will be automatically brought
For those not in the know, you need to submit Form 19 (for PF) and Form 10-C (for pension fund) to the PF office for withdrawal of the accumulated PF balances, irrespective of the time lapsed. The system should be made more transparent and information such as balance funds, accumulated interest, and status of the application for transfer of funds/withdrawal should be made available online by the government. The process results in a lot of hardship for the common man. Until SSN is available, it is advisable that you should transfer PF balances to the new employer, instead of withdrawing them and spending them earlier.
DOCUMENT PROOF
In case you decide to withdraw your PF money after three years of leaving the service, certain additional documentation may need to be furnished for identification and check purposes, such as affidavit, indemnity bond. These forms also require the signature attestation of the previous employer. An advance stamped receipt also needs to be provided along with the other documents.
Further, if you’ve taken a loan against your PF, the outstanding loan amount balance would be adjusted against the accumulated PF account balances at the time of settling the PF dues upon separation. It may be difficult to get the outstanding loan balance with the previous employer transferred to the new employer. Also, in case of employer’s own trust PF trust, the terms and conditions of the specific trust are required to be followed.
MULTIPLE STRATEGY
If you’ve multiple PF account number, there is a provision that you can club the PF money from all your previous employer’s and transfer to your current employer PF account number through Form 13. Let’s say that you worked in three companies — A, B and C — before joining your current employer, D. In this case, you will need to submit three separate Form 13 (for company A, B and C) to your current employer, D. D will then get your accumulated PF balances transferred to your current PF account number being maintained with D. The same remains the process even in case you had worked for employers in different cities.
The outstanding balances in your PF account represent your long-term savings and hence tax planners believe that the decision to withdraw it prematurely should be taken carefully. Eventually, it depends on your financial circumstances. In case you feel that the amount withdrawn have more utility while you are still young and are switching jobs (say for capital acquisition, social demands), then the option of withdrawing may seem justified.
THE ONLY thing constant in life is change. Golden words. But it’s one stark reality that you may have to face one day. Harsh Mehta, a middle-level executive, was in a similar state of mind while handing over his resignation letter. For the 36-year-old, who worked for more than a decade in the company, it was an emotional moment, since this was the place from where he started his career. Mehta, in need of funds, decided to withdraw money from his provident fund account, little realizing the implications of the decision. A year down the line, Mehta, unable to perform in line with the expectations of the new firm was thrown out of the job. The old company refused to reinstate him. He was caught off guard. He took up a job in a little-known company at a much lower salary to support his family. Most people in India don’t realize the importance of a PF account. Here’s a lowdown on what you should know when you withdraw or transfer your PF account.
FIRST THINGS FIRST
Tax planners advise that as a priority you should immediately furnish your PF account number, as registered with your previous employer, upon joining a new employer. This ensures that your accumulated balances – Employees Provident Fund (EPF) and Family Pension Scheme (FPS) – are brought forward in the same PF account number and fresh contributions get added thereto. However, in case you need to transfer the accumulated balances to the fresh PF account with the new employer, you need to submit Form 13 to the PF department through your current employer.
Currently, efforts are underway by the PF office to provide an unique Social Security Number (SSN) to every salaried person. After this, no employee will be allotted multiple PF account numbers. As the salaried person, you will have to provide this social security number to your new employer and the accumulated balances in the EPF account will be automatically brought
For those not in the know, you need to submit Form 19 (for PF) and Form 10-C (for pension fund) to the PF office for withdrawal of the accumulated PF balances, irrespective of the time lapsed. The system should be made more transparent and information such as balance funds, accumulated interest, and status of the application for transfer of funds/withdrawal should be made available online by the government. The process results in a lot of hardship for the common man. Until SSN is available, it is advisable that you should transfer PF balances to the new employer, instead of withdrawing them and spending them earlier.
DOCUMENT PROOF
In case you decide to withdraw your PF money after three years of leaving the service, certain additional documentation may need to be furnished for identification and check purposes, such as affidavit, indemnity bond. These forms also require the signature attestation of the previous employer. An advance stamped receipt also needs to be provided along with the other documents.
Further, if you’ve taken a loan against your PF, the outstanding loan amount balance would be adjusted against the accumulated PF account balances at the time of settling the PF dues upon separation. It may be difficult to get the outstanding loan balance with the previous employer transferred to the new employer. Also, in case of employer’s own trust PF trust, the terms and conditions of the specific trust are required to be followed.
MULTIPLE STRATEGY
If you’ve multiple PF account number, there is a provision that you can club the PF money from all your previous employer’s and transfer to your current employer PF account number through Form 13. Let’s say that you worked in three companies — A, B and C — before joining your current employer, D. In this case, you will need to submit three separate Form 13 (for company A, B and C) to your current employer, D. D will then get your accumulated PF balances transferred to your current PF account number being maintained with D. The same remains the process even in case you had worked for employers in different cities.
The outstanding balances in your PF account represent your long-term savings and hence tax planners believe that the decision to withdraw it prematurely should be taken carefully. Eventually, it depends on your financial circumstances. In case you feel that the amount withdrawn have more utility while you are still young and are switching jobs (say for capital acquisition, social demands), then the option of withdrawing may seem justified.
