How merging PF accounts helps avoid tax on withdrawals

Have you worked in more than one establishments where you have maintained provident fund accounts? Have you kept the amounts lying in your PF account with the earlier establishments without transferring the PF funds to the present employer?If so, you should shed your inertia and consolidate all accounts by merging them. The Employees’ Provident Fund Organisation (EPFO) has advised subscribers to merge all their accounts to reduce the tax incidence in case of early withdrawals of funds.“The total service in the present establishment as well as previous establishments is counted and therefore it is advisable to merge all PF accounts,” EPFO has said while issuing new composite claim forms to facilitate withdrawals.Tax is deducted at source on EPF corpus if the money is withdrawn before one makes contributions for at least 5 years (60 months). Thus a merger of previous accounts will increase the period of contribution by the number of months put in by the subscriber in the previous establishments and could help in escaping the tax incidence.Also, one should have a Permanent Account Number (PAN) issued by the Income Tax Department to reduce the tax incidence in case one needs to withdraw PF money for any specified purpose before the mandatory 5-year period of contribution to avoid tax on withdrawals.As per EPF rules, the TDS rate is 10 percent if the member submits PAN number. In the absence of a PAN number, the TDS is deducted at a much higher rate of 34.6 percent.The EPFO had recently eased withdrawals processes by allowing subscribers whose Aaadhar number and bank details are provided with their Universal Account Numbers (UAN) to submit their claim forms directly to the EPFO without attestation of employers. However, those who have not seeded their Aadhar numbers and bank details will continue to have their claims verified by the employer.EPFO has also permitted self-attestation of documents by subscribers that are required for partial withdrawals from accumulated PF corpus.Also, the earlier requirement of enclosing certain documents such as marriage card in in case of marriage advance, or proofs required for withdrawals for post-matriculation education of children have been dispensed with.