Should you withdraw or transfer Provident Fund (EPF) during a job change?
Many of the employees would change the job to move in their career. One financial aspect which would come into mind is whether we should withdraw or transfer an employee provident fund (EPF) during a job change. In this article, I would provide some views on what an employee should do about provident fund when he or she would change jobs?
What is employee provident fund (EPF)?
When you are employed in a company, 12% of basic and dearness would be transferred to employee provident fund. An equal amount of employer share is also transferred to this EPF account. The current interest rate is 8.5% per annum. Means you would be getting 8.5% fixed returns on your EPF balance every year.
Also Read: How to check employee provident fund (EPF) balance online?
What happens to your employee provide fund (EPF) account when you change your job?
- Legally an employee should transfer his EPF account to new company when he changes his job. However, you can withdraw amount based on certain criteria.
- If you want to withdraw EPF amount and if you have completed 5 years of continuous service in single or multiple companies, you are eligible to withdraw EPF amount and the returns are tax free.
- If you want to withdraw EPF amount and if you have NOT completed 5 years of continuous service in single or multiple companies, the employer share including interest is taxable. This amount needs to be treated as “Salary” and pay necessary income tax based on your income tax slab in the year of withdrawal.
Should you withdraw or transfer your EPF account
PF offers 8.5% per annum returns: Good interest rate of 8.5% per annum on your EPF account discourage for you to withdraw.
Good retirement option: EPF could be a good retirement option as you save for long term till retirement. You are forced to make savings.
Tax free returns: You can expect tax free guaranteed returns from EPF account.
Compounding helps to grow money: The compounding interest on the EPF account for the long term would help you to save good amount of money.
Consider withdrawal last option: You should continue to invest in EPF account considering positive factors and withdrawal should be the last option.
Withdraw only after 5 continuous years of service: Your withdrawal option should come only after 5 years of continued service that too in case of emergency only. This way you can get a tax exemption. Even if you are falling in the 20 % tax bracket, all such EPF amounts of employer + interest on that needs to be paid as income tax which would screw up your withdrawn amount.
Withdraw in case of discontinued employment: You can opt for a withdrawal of an EPF amount in case you are discontinued from employment, and take care of any other business activities.
Also Read: Comparison of EPF Vs PPF Vs VPF with Pros and Cons
Conclusion: I feel an employee should continue to invest in EPF and should transfer the EPF amount to new company during change of job. Withdrawal of EPF account should be your last resort.
If you enjoyed this article, share it with your friends and colleagues on Facebook and Twitter.
Suresh
Should you withdraw or transfer EPF during a job change
- 4.5 Million SIP Closures in Dec 2024 – Should Investors Be Concerned? - January 12, 2025
- 5 Worst Performing Mutual Funds in the last 1 Year [-24% to 0%] - January 11, 2025
- Laxmi Dental IPO Review – Should You Bet on This Growing Dental Giant? - January 10, 2025
i am doing a job from last 30 months and next month i am going to get married so can i withdraw my pf & how much i can withdraw please rply.
I worked in an organization for 5 years. I moved to the new one with a gap of 10 working days. How can I withdarw the amount? Also, how do I see the pension amount that I will get if I don’t withdraw
Dear Hi,
Good day,
I would like to know that my PF account is active with my current organisation coz I got a new opportunity and by soon I planned to switch the job. And what I want to know about my PF as I worked for 3.5 years in current organisation. So, will i eligible for PF and if so how they calculate? Please let me know for the same.
Hi I have resigned my previous company on july 30th 2015 and joined new company.Can i withdraw previous companies PF amount as new PF got created in New organization.
Please help me out
I have worked in Employer-1 for 3.5 years & had PF-1 account. Then I joined Employer-2 & worked there for 1.4 years & had PF-2 account.
Now, I have again joined Employer-1 & have PF-3 active account. PF-1 & PF-2 are inactive now. Pls suggest me best way (transfer/withdrawal) to deal with this situation.
I am not concerned with my retirement sum. Basically want to know best way to pay minimum tax for PF amounts on all 3 accounts.
Pls note that I have not transfered/withdrawal PF-1, PF-2 amounts till now.
Worked in HCL Technologies, Ltd. for more than 2 years. I Left HCL Technologies Ltd. in June 30, 2014, but till now just received partial payment of PF amount.
Since interest rates are more in PPF account, Can I transfer my old company EPF amount to SBI PPF account
Pls respond. Thanks, Nikhi
You cannot transfer EPF amount to PPF account.
Hi,
I need your advise.
I was working in previous organization since 11-Mar-2011 to 5-Sep-2014. I left this job on 5-Sep-14.
But unfortunately due to some issues I could not join new organization and now I am jobless and probably join new organization in December-2014.
So after I left previous origination, there is almost 3 months gap. I don’t want to withdraw PF. I will transfer it to new origination PF account. So my question is, can I transfer previous PF account to new account after service gap of almost 3 months.
I have PAN from my previous company.
Regards,
Dear all. Please provide the answers for above question.same from side ??
As far I know, your PF number (PF Acount) stays alive for 3 years without being credited into. In your case its just 3 months. So ideally the same PF number can be used in your new work-place.
I worked in a private company having approved PF Trust, for 2 years and 8 months. I left this job 18 months back. My present employer ( a new State Govt. PSU), has not yet instituted the EPF scheme. Kindly advise me whether I should go for refund of my PF from the previous company or wait for some more time, so as to save tax ( tax amount will be substantial).
Regards
Anand
Hi Suresh
one query from me
“I’m working in single MNC for past 6 years , i dont want to change the company but i want to withdraw PF amount and invest the same .is it possible to withdraw? please let me know
Thanks
Hi Sureshji, Wish you a very Happy and a prosperous new year.
I will be going for an overseas job. I have read the previous posts where the recommendation is to withdraw the PF amount.
Given the attractive tax free returns of 8.5% , isn’t it a good investment option? Can you suggest other good investment options for NRI employees?
Regards
It depends. If you are planning go to onsite for long term, you can with draw, else you can continue. You can refer our article on good options for NRI article
Hi,
I have worked in an MNC for 7.4 years ( one company). Now I have joined to new company.
Please advise me whether should I transfer my PF account or withdraw my EPF account?
If I withdraw my PF account whether I will get both Pension and EPF amount together( without taxable) ?
Or
If I Transfer my exisitng PF account to new account how many days/weeks it will take to transform?
Please adivse which is the best option to do.
Thanks
Hi Suresh Ji,
My question is:
Previously, I worked for 1.5 years with Hindustan Oil Exploration Company Pvt. Ltd. based in Chennai, head office in Vadodra, Gujarat. My EPF account was registered to Vadodra EPFO.
Then, I changed my job 10 months back and currently working with RIL E&P, Navi Mumbai. After changing my job I did not transfer my Old EPF account to New EPF account, neither i withdrew it, as there was not a single day gap in between my job change.
In such case what could be the optimum solution to my situation.
Thanks & regards,
Sidhant
My company was taken over by another company and there was a mandatory transfer of PF from old company to the new company PF.
I have found that when they have deposited to new account there is a deduction of amount.
Could you please let me know is this deduction is valid ?
Hi Bibek, There cannot be any deduction in case a company is being taken over by another. Pls check with your new company.
Hi,
I worked in IBM India Pvt.Ltd for 3.5 year and now I have switched jobb almost 9 months back. I did not either withdraw or transfer EPF. My total years of service is 4.1. Should I get my old EPF withdrawn or should wait for 1 more year to complete 5 years of service to avoaid tax. Also will I be getting interest on EPF account which is with IBM.
I have a question. I worked for a company from June 2002 – March 2011. From April 2011 till date Aug 2014 I was transfered to a subsidiary compnay. The subsidary co opened up new pf ac and its going smooth. (The original emplyer is same) Thepayslips have changed. My company did not transfered my pf of 9 years of serivice from 2011 till 2014 for 3.5 years. Can I ask for a withdrwal of old pf (knowing my current balance on sms) as I am in need of money?
Also withdrwal is a better option or transfering is a better option in this case?
Hi,
I had worked in my previous company for 4 years and switched to new company now. I want to withdraw my pf after 1yr so that i can avoid paying tax.
What is the best way among two
1. don't tranfser the pf from old employer to new employer, wait for 1yr and then with draw.
2. tranfer pf to new employer and withdraw after one year.
Thanks in Advance.
Hi,
I have initiated PF Transfer process and completed almost 3 months. Currently on PF Site it's showing
Status : Claim Form 13 for Transfer to New Account Number: AGAINST Old Member Account No (MHBAN00456650000121212) has been approved. Payment is under process.
How much time will it take to transfer in my account?. I have raised grivance but did't got any replied for it.
If you see this message, it should get closed within 4 weeks time.
I changed my job in 2009 after serving 10 years and without any break I joined my present employer in 2009 itself. In 2010 I applied for epf transfer but it could not take place though I enquired from epf office several times. Later I could not follow it up so religiously due to preoccupation. Recently when I approached epf office again, I was informed that my epf was not transferred and my earlier application was not traceable. I was asked to submit it again which I did. This time my account got transferred but with interest only upto 2012. Interest for remaining two years i.e. 2012-13 and 2013-14 have not been credited. They are now referring to some rules which forbids credit of interest after 3 years in an inopeative account, if the member does not apply for transfer after 3 years. But I did apply in 2010 and it is not my fault if my application is not traceable. further I am not supposed to follow up my case every now and then. It was incumbent upon epf office to transfer my account once I submitted my transfer application. Sir, What is the rememdy left for me now and whether eps account is transferred with epf account and what is the way to ascertain it. Thanks
Hi, I have a question. Would request you to please reply asap as tomorrow is the last day for filing ITR. I worked in a company for 3.5 years and then quit and did not join another company for 4 months. After joining the second company I got my previous PF account transferred to the new company. I quit after working in the second company for 2.5 years and then withdrew the provident fund. Now would my service period be considered as more than 5 years (and hence no tax on PF) or only 2.5 years?
Rule 8(iii) of part A of schedule 4 of the IT act says that if the previous PF account is transferred to the new company then all the previous work period should be added to calculate the total service period. It doesnt say anything about any gap in service as long as previous PF account is transferred. However no website is clear on this and they say that there should be no gap. Can you please help me on this.
Sanjay, gap is considered as continuous service
So I do not need to pay any tax on the provident fund withdrawal even though I i did not have any job for 4 months between my first and second job, right? Why other websites then say that a gap will be considered as discontinuity?
Hi,
I had applied for a PF transfer while switching to new Job in 2010. The PF has still not transferred and meanwhile I have swicted on to a new job (2012) and had to again apply for PF transfer. Bot the Old PF accounts are active and can see the balances. What should I do now? Is there a process to withdraw both the PF accounts since I have a third PF account active. Pls advice.
Pls apply for transfer
Hi,
I got my EPF account transferred after working in a company for 1 and half years.
When i switched to the new job, got my EPFO old account transferred to the new account of new employer.
The process took 15 days.
The transfer occured, but only EE contribution and ER contribution has been transferred, but not the amount of interest in the Pension fund.
Is Pension fund account same for the person, or should the EPFO should have transferred that amount to the new too.
Thanks in adavnce.
Mueksh
Mukesh, If you withdraw, you would not get pension amount. However if you are transferring PF amount, entire amount including pension should be transferred. Pls call EPF Office.
Hi Suresh,
I am an NRI now since 2 years. What should I do with my PF money.
I worked with an Indian Company for five years(3 yrs in India and 2 years in Germany) and now I am working in Germany with a German Company since the last 2 years. My PF is still with the Indian Company. I have got an email that the PF will not get interest after 36 months. What should I do with it? Should I take it out or is it better to put it in a PPF account?
Thanks in advance,
Vishal
Vishal, After some time, the PF amount would move to discontinued account and you may get less interest. Instead, apply to withdraw PF amount and invest in PPF or NRE FD scheme to get good returns.
Dear All,
I have job for 1 year and if I have a plan for gap of 2 years for Post Graduation. Than after completed my post graduation my old PF no. will be continued or not for my new job. Please give me some information about for gaps in job.
Thanks
It would continue, you should quote this number to transfer old pf amount to new account
Hi Suresh,
Nice Article !!
I had Transffered my Old PF amount to New PF A/c. I got Employer Share and Employee Share but Didn't get The Pension Fund Transafred to the New Account. It Show 0 in E-Passbook also.
Could you please Suggest any way to get the Pension Funds Transfred to New PF Account.
Thanks in advance
Ravi
You should get it. Can you pls contact your PF office where your company as registered.
Hi Sir,
Previously I was working in HCL Technologies Chennai,India and changed to new company and completed 1 year now. Till now I didnt neither withdrawed nor transfered my PF. Please let me know what happens in such case. Any interest will be credited year by year or what exactly happens to my PF amount & account.
Note: I think HCL has its own trust for PF i.e HIL Employees Provident Fund Trust (Establishment Code : HR/5572)
Hi Ramakrishna, In such case, you should withdraw money as you cannot transfer this to EPF account. I do not know how HCL pays in case of non withdrawn amout
Hi Sir,
I have a doubt reg pf transfer.
I worked in a company, which maintains accounts with epfo for 3.5 years, now in my new company pf is managed by trust.
Is it possible to transfer from epfo to trust pf?
Incase, it is not possible, can I keep it like that for 1.5 years more, to complete 5 years and take it to avoid tax?
If I let it stay like that, to complete 5 years, will that period be counted or only that period when we make subscription will be counted?
Hi Tejaswi, This is good point, but I do really do not have answer to this. 1) You cannot transfer from EPFO to company managed trust 2) Check with PF office about this
Hello Suresh ji,
My situation is similar to tejaswi, only thing that I need to transfer from Company trust to EPFO.
Whether I can Transfer or not?
If I Transfer that will be beneficial for me, but if I cannot, can I leave that amount till my 5 years of job is completed and then withdraw it to avoid paying unnecessary taxes?
Also please guide if I withdrew the amount before 5 years, will it have any effect on my EPS account?
Hi suresh,
I am following you articles for last few days … they are really infromative and nice . I continue to follow your advice for investmets in IPO . Hope that helps me.
I am working for an Indian MNC for 9 years 6 months. if i need to switch company ….
1. Can I transfer EPF amount to my PPF account in SBI?
2. What happens to EPS amount , you mentioned it is not transferred?
3. For getting pension amount do i need to complete 10 years service in that company?
Thanks
Krishna Prasad
Krishna, my god 10 years in single company, hat’s off to your patience 1) EPF is differnet from PPF, you cannot transfer 2) You need to transfer your EPF/EPS to new company where you are moving 3) There is no such rule. Recently EPFO has decided to have unique EPF number and all these issues should get sorted out.
Thanks for you immediate response
Hi Suresh,
I am writting on behalf of my husband who is working in an service based MNC. He has plans to move out of country. Will it be an best idea to withdraw the PF amount and invest in some other property? He will not be paid in India.
Warm Regards,
Hema
Hi Hema, I agree that in case any plans to move out of country, it is better to withdraw and invest in other options.
Hi Suresh,
Very informative article this is.
I have advised my colleagues to go through this.
Thank you for the great research!!
Thank you Shiv. Happy to hear that.
Suresh,
What abt in case of PF trust managed by compnay, where we have worked for say 3 years and our total service tenure is more than 5 years , and if I want to withdraw money, will the PF trust owned by company deduct the tax.
Lalith, None of the registered PF trust would deduct any Tax while making the payment to employees. It is the employee who need to pay tax and declare in IT returns. Please check with your company in case they have any different view.
Suresh, What I am trying to say is, whether we need to pay tax, if I resign after say 3 years and current PF trust is managed by compnay and say total service is more than 5 years, where in I had transferred my PF amount from EPF trust of previous companies.
Lalit, You asked me a tough question. I agree with you that it may be difficult to convince or prove current company that you completed 5 years of continued services, hence they should not be deducting any tax. What I feel is company may not deduct Tax on such such PF withdrawals. It is individuals to declare as taxable and pay necessary tax. However I have not come across such instance Lalit.
Nice one. Thanks. I do not know that there will be tax if we withdraw before 5 years of continuous serivce.
Thanks for the info.
Hi Suresh,
Does transfer of EPF account comes with some penalty amount deductions ?
If yes, is it significantly higher than the tax deduction done on Employee share if one does not work continously for 5 yrs in one organization.
Regards,
Aswin.
Ashwin 1) There is no penalty, however you would get only EPF amount and not the EPS pension amount (amount deducted by employer contains even EPS also). 2) Point no.2 is not valid as there is no deductions.
Hi I have a question….if I am leaving my job in India after 2 years and join a job in a foreign country…then what is the best option for me to not pay any taxes on thr epf amount??
Should I withdraw it or keep it open without continuing job in India??
Mukul, You asked a tricky question. I would try to answer it. The idea here was that employee should have been in employment for continuous 5 years. Since going abroad may not indicate continuous employment preferably in India, I feel the tax would be applicable. In case such thing arises and there is more than 2 years gap, you better withdraw the money. Since PF account cannot be kept open without operating, there are chances that it would become inactive and you may need to struggle to reactivate again.