For a lot of people in service, employee provident fund (EPF) is quite a sizeable amount of their cots to company (CTC). What should be done with it when an employee decided to change jobs?
For a lot of people in service, employee provident fund (EPF) is quite a sizeable amount of their costs to company (CTC). What should be done with it when an employee decided to change jobs? Should it be withdrawn or transferred? If it is prematurely withdrawn, are there any tax implications? In an interview to CNBC-TV18 Harsh Roongta of apnapaisa.com answered these queries.
Below is an edited transcript of Harsh Roongta's interview on CNBC-TV18.
Q: For people who are working, the EPF amount is quite a sizeable amount from their CTC. What should be done when an employee decides to change his job? Should it be withdrawn or should it be transferred? If prematurely withdrawn, are there any tax implications for the person?
A: There are two-three things to be kept in mind; first when one changes job he is not allowed to withdraw. If in the new job there is provision for provident fund which means it is not more than 20 employees. If it is an establishment that has provident fund then one is supposed to transfer, one are not allowed to withdraw.
I do not know what the penal consequences are if you make a false declaration saying that you are not having a job or you are joining somebody who doesn't have provident fund. But, you are not supposed to withdraw.
Second, by transferring one gets two advantages; the period of time one spends in his current job gets added to the period of time that one will spend in the next job. The period is important because once five years are completed; any withdrawal later on is tax free. Also, one can withdraw for things like buying a plot or house.
For seven years, one can withdraw for education and marriage. So, the period is also important. The benefit of that can be reaped only if one transfers their EPF balance. Thirdly, if the period that one has spent in your current job is less than five years then whatever is withdraw will be taxable.