The BuyT Desk
Most of the salaried professionals have EPF (Employee’s Provident Fund) as an investment but usually, they lack complete knowledge about it. Most people do not keep a record of their investments or track them properly. EPF is a small saving scheme to ensure that while you toil for years in your job, a corpus is ready for you when you retire. You can contribute a maximum of 12% of your basic salary towards EPF. Your employer will make an equal contribution to your EPF account. However, it is possible for you to contribute as much as you desire via VPF (Voluntary Provident Fund). Earlier, EPF belonged to EEE (Exempt Exempt Exempt) tax category, but as people started parking extra funds in EPF to enjoy the tax benefit, the Government came up with a plan. Now, the interest earned on a contribution above Rs.2.5 lakhs in an EPF account will be taxable. Among all the small savings schemes, EPF provides the highest returns. The current rate of interest is 8.50%. The scheme matures when you reach the age of 58 years. It is eligible for tax deduction up to Rs.1.5 lakhs under section 80C of the IT Act.
What happens when there is a break in your EPF contribution? This could happen you have left your job for any reason whether to join a new company, to begin your own business, or to relocate abroad. The first thing to understand is that the corpus in your account will continue to earn tax-free interest (until the age of 58 years) even without any new contribution. However, the moment you turn 58 years old (retire) or resign from your job or your employment ends, the interest earned henceforth is taxable. Also, note that in case you retire before the age of 58 years, you can withdraw the accumulated corpus from your EPF account within 36 months. If you fail to do so, then the account becomes inoperative and you do not earn any more interest on the accumulated funds.
Here, we talk about the possible options you can make w.r.t. your EPF account after changing your job:
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Add the new EPF account to the same UAN (Universal Account Number): As the name suggests, UAN is a universal number. It remains the same even when you join a new company. The finance department of the new company can simply add the new EPF account under the same UAN. You can easily transfer the balance online from the old EPF account to the new one.
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Open a new EPF account under a new UAN: In the case, a new EPF account has been opened under a new UAN, your previous service years will not be added to the new account. It is best for you to merge both the UANs and transfer the previous account balance to your new EPF account.
c.Withdraw the accumulated corpus: Of course, you have the option to withdraw the balance accumulated in your EPF account but this forfeits the purpose of having a retirement corpus.
