"Careful planning is the key to safe and swift travel". – Ulysses
The rule applies to many young executives, especially those who are forever looking for better job opportunities. But only a careful planning and following a financial checklist will give them all the benefits of the change. For smooth transition from one job to the other, you need to carefully follow this checklist:
OLD SALARY ACCOUNT
Most companies would ask you to open a new salary account. This will leave you with an extra account to maintain. The old account you opened when you were in your earlier company would lose the benefit of zero-balance facility of a salary account after three months. If you fail to maintain the required average quarterly minimum balance, it would invite penalty charges. If the account becomes non-operational for over two years, it could become dormant or inoperative, inviting additional yearly charges as a penalty. If your old salary account is linked to various investments like mutual funds, shares and loans, you may want to update the records with the respective investment company and financial institutions by giving them the new account number.
EMPLOYEES PROVIDENT FUND
You could either transfer your existing EPF account to the new employer or close the old account and open a new account. However, withdrawing the corpus and opening a new account could take around three to six months. In addition, you would be left with a smaller retirement corpus because you would lose the advantages of compounding. You would also have to pay taxes if it is withdrawn before five years. So, transferring the corpus is the better option as it would give you better tax benefit and retirement benefit.
HEALTH INSURANCE
You should check the features and benefits of the health insurance cover provided by your new employer. Check the coverage amount, whether the coverage is on a floating or individual basis, the total number of dependents covered, the list of hospitals for cashless facility and so on.
Most importantly, check the availability of the health cover during the notice period. The notice period is the period from the day one submits the resignation letter to the day one gets relieved from the job. It is normally three months. Some employers don't provide health cover to employees serving the notice period. So before entering into the notice period, one needs to make alternative arrangement for health insurance.
TAX COMPUTATION
Most employers would be computing your tax liability after taking into consideration the basic exemption limit of . 1.8 lakh and also the exemption availed under Section 80C.
So there is a possibility that your previous employer and present employer may give you these exemptions for the same financial year. You should make sure that the deductions and exemptions regarding tax liability are made only once.
Always report the income earned from your previous employer for that financial year to your new employer. This would avoid duplication and make sure one is not taxed twice or given the benefit twice, which could result in payment of a lump sum amount as taxes later. It is essential to collect the Form 16 from the previous employer as proof that one has received the tax benefits and paid the tax liabilities.
