Withdrawing PF immediately after job change? Think twice or face THESE problems
New Delhi: Many employees working with private companies often change their jobs to grasp better opportunities, hike in salary and/or position. While switching jobs, many employees also withdraw the Employees Provident Fund (EPF) money deducted from their salaries in their previous organisations. However, withdrawing PF after switching jobs might now be a good idea for a few reasons. Instead, employees should transfer the PF funds in the account associated with the previous employer to the account linked with the new company.
Withdrawing EPF after changing jobs has a few disadvantages. For starters, if you withdraw your PF then you’ll be missing out on high returns offered by EPFO for your investments.
You’ll also not be able to take a lump-sum amount at your retirement. But one of the major disadvantages of early PF withdrawal is that if you withdraw the entire amount before contributing for five years, then you won’t be able to claim any tax benefits under section 80C of income tax on contribution.
On the other hand, if you transfer the amount from one PF account to another PF account, then you will be able to avail tax exemption benefit.
Another major disadvantage of withdrawing PF after switching a job is that you won’t be able to take advantage of the pension benefits offered by the EPFO. According to the EPFO rules, an EPS member needs to complete 10 years of contribution to receive a pension after the investor turns 58. This means that contribution of 10 years in EPS is mandatory.