Prabha is a User Interface Designer (Software design) + Entrepreneur, and a passionate home organiser. She was a spendthrift until she came across the book 'Millionaire next door'. In fact, this (the book) was her turning point towards frugality and financial freedom. Read more

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23 comments

    Hi Prabha,

    Good Blog !

    As you wrote that if we withdraw the PF before 5 years, then its 10% taxable.
    I have worked in my –
    1st Organization = 2.5 years
    2nd Organization = 1.5 years
    3rd Organization = 1.5 years

    With each of these 3 organizations having provided me with 3 different individual PF numbers. All 3 PF accounts have some funds now. I have not transferred them.

    My query : As you can see, I have worked for more than 5 years totally but not 5 years in a single organization. Also, I have 3 different PF numbers with some funds in each of them.
    So, please tell that on withdrawing, whether my total PF would be taxable ??

    Thanks in anticipation !

    Regards,
    Nivesh Modh

    Thanks for the compliment, Nivesh!

    Answering to your question, as you’ve not transferred the PFs to your new PF account, withdrawal from each account becomes taxable if the PF amount has more than 30,000 rupees.

    So, if any of your PF account holds more than 30K, then that amount is subject to 10% tax. Or, if all the 3 holds more than 30k, then each amount in the account is subject to 10% tax.

    The following article on Hindu tells it clearly
    http://www.thehindu.com/business/Economy/tax-on-premature-pf-withdrawal/article6956039.ece

    Also, by now, your PF account might have been in-operative due to lack of PF contribution each month.
    Try checking your PF account status using the following steps.

    I would advise you to do the following steps in order to withdraw or transfer funds your hard earned money

    Step 1: Check the epf balance of your each account using this link. This link tells whether your account is operative or in-operative
    http://epfoservices.in/epfo/member_balance/member_balance_office_select.php

    Step 2: In case of inoperative PF account, use the EPF online help desk (the govt has come up with this help desk initiative this feb) to withdraw or transfer inoperative PF funds.

    The online help desk asks your employment details, PF number, contact details etc. Keep those handy!

    http://timesofindia.indiatimes.com/india/EPFO-launches-drive-to-help-activate-inoperative-accounts/articleshow/46293899.cms

    Once submitted, you get an acknowledgement number, note it down. EPF help desk will contact you to help you transfer or withdraw your PF funds

    Step 3: If the PF account is active, contact your current company HR to transfer for further details, or your previous company to withdraw it.

    Hope, you got a clear idea now!

    My personal advice: Try transferring all your PF accounts to your new account, and keep it safe. This is the best long term investment, so try not to withdraw your PF money.

    Hello Mam,
    I have a small query. I read somewhere that it is illegal to withdraw pf money while switching jobs if you get another job within 2 months after resignation from previous employer. I had withdrawn my pf money under similar circumstances. Is that going to be any problem for me??

    Hi Rahul,

    No worries, it’s not going to be a problem. Many people (including me) have withdrawn PF while job switches, but going forward don’t do it. NOT that it creates problem, it is a loss for you. Keep that money safe in PF account, it grows every year….

    I have changed my job. In the last company, they provided PF and UAN No to me and I worked there for 7 months. I don’t have a clear idea about PF. How to link PF account to my new salary account? The company I am working now doesn’t have PF option. Please give a clear idea. I am confused and worried. What should I do?

    Hi Sumit,

    Check your payslip whether an amount for PF is deducted – if the deduction isn’t there then you can re-confirm that your current new employer has no PF option.

    Companies less than 20 employees or some international companies may not have PF option, so that shouldn’t be a problem.

    Keep your PF and UAN number safe, and produce it to your next new employer to link your PF account.

    Linking or not linking your PF account to new employer is not going to affect your employment at all. So don’t be confused and worried.

    Your money in the PF account remains safe until then, keep checking PF balance online with this site http://www.epfindia.com.

    Hi Prabha, Is it good to increase the PF amount other than saving the same ammount under some bank scheme?
    Which one is better, saving more money through PF or letting the PF at 12% only and rest doing the saving under some bank scheme?

    Hi Parvesh,

    Great question!

    Any PF amount you add to your PF account is subjected to compound interest: 8.65%. Meaning? Interest on interest which is very good.

    The banking schemes you are mentioning: do a detailed analysis on the interest rates they pay. are they subjected to market risks?Do interest rates fluctuate every year?Also, consider inflation along with the calculation.

    Compare and decide…

    My suggestion: If you don’t have any long term investments, consider putting a decent amount in your Provident fund account using VPF, and also in Public Provident Fund (PPF) account. These are good and safe long term investments.

    For short-term investments, you will have to do a detailed analysis. Safe ones are FDs, RDs etc., but this is totally upto you. I would advise to understand each and every banking scheme’s calculation and then invest.

    Hope this helps!!!

    Urgent query–

    1. Supposing your planning to work outside india in the next 1 year and most likely stay there for 3 to 5 years and further is it a good idea to then withdraw the PF ?

    2. 3 years I was with a company and have still not withdrawn the PF – the amount is around 3 lakhs I believe after two years of interest but they say they don’t pay interest after two years ., I left in the year 2011-12

    3. Then I was working in a second Company for 2 years and again after two years left in the year 2015 end and not working currently since last two years trying to peruse higher studies and or work outside india and may search for another job in india to work for the next 1 year before I finalize my travel out of india

    After leaving my job it was been close to 2 years

    So both are seperate PF accounts and lying there

    What do you recommend I do ??

    What are the best options with me ??

    Also another seperate query is for another family member –
    4. Supposing the UAN was not activated and we have worked in a company and we have only the PF number can the next new company create a UAN and a new PF account number and can we close the previous PF account of the previous company and withdraw our money now from the previous company .. please note there is a Gap between the work of more than 1 year between the two Companies and were not working during that duration and had left the PF account as it is in the X company and had not withdrawn it

    Also in this case the PF was for 6 years in the X company and so on withdrawal won’t be charged interest right ??

    Also will in both queries and the cases – while withdrawing PF from each X company we will get 100% money withdrawal right ? It is not 50% of the PF amount given to me while withdrawing right ??

    Hi Ravien,

    Try merging all your PF accounts to 1 UAN, by contacting your current HR. This is easy…

    Or, you could link everything under 1 umbrella using UAN by yourself.
    https://www.basunivesh.com/2015/12/17/epf-uan-registration-or-activation-is-now-online/

    No you can’t withdraw all your EPF funds, only 50% of the total amount is allowed to withdraw. Rest will be settled only at the age of 56. This is the new rule now.

    For withdrawals after 5 yrs of employment, there is no TDS.

    Based on the latest government rule, inoperative or old PF accounts are now made to generate interests. So don’t ignore this opportunity, link it with your UAN

    What I would suggest is, merge all your accounts under 1 UAN either by yourself or contacting your employer, before your turn out to be an NRI. Once merging is done, you can start tracking how much your money is growing year by year. A lump some money will be available to you at the age of 56, when you retire.

    Once you turn into an NRI, you won’t get a chance to earn compound interest on long term investments like this. So don’t withdraw.

    Hi Prabha,

    I have a question, Please suggest me.

    I have allotted two UAN Nos. One is from my Previous Employer and one is from my Present Employer. I want to withdraw the EPF amount associated with the old UAN No. Here I want to mention it that there only a 15 days gap in between two jobs and both the establishments are in two different States.
    My question it that, is there any option that they can trace out my present status of employment and decline my PF Withdrawal Application or is there other any way to withdraw my old EPF amount as it very urgently required.
    Kindly suggest me.

    Try merging both the UANs into one, looks like this can be done online.

    Now that the systems are strict, I personally feel your job shift could be traced. I would suggest merging the accounts to 1 UAN to avoid any future complications.

    May be this post from basunivesh might help you
    https://www.basunivesh.com/2016/09/23/allotted-two-uan-numbers-how-to-merge-or-deactivate-epf-uan/

    Also, I wouldn’t suggest anybody to withdraw EPF funds because it earns you compound interest..All other investments gives you only simple interests which is less money growth. So think twice before you withdraw.

    Hi prabha,
    I have a query, I was working in a company for 3 years.Now I left my job because of personal reasons. If I withdraw my pf money after 2 years it is tax free?or after 6 month if I joined other company, for 6 months no amount has been saved in my pf account is it affect?

    Hi Jyoti,

    Your PF withdrawal is tax free after 2 yrs., i.e.., the time period should be total 5 yrs after the date of PF account opening.Per the new PF laws, you can withdraw only 50% of your total PF amount before age 56.

    The 6 month gap in the PF funds shouldn’t be a problem. Use the same PF account number for your PF funds with your new company.

    Hope it helps!! Thanks

    Hello
    hii prabha,

    Loved your explanations for above questions. They are very precise and helpful.
    With that i also have queries related for EPF.

    Please read one by one and answer in the same sequence-

    1. In the employer contribution of 12%, is that 12% deducted from employee basic pay or is it the extra amount which is to be paid by the employer?

    2. As read on net, can a employee contribute more than 12%?
    e.g. can a employee contribute 15% of his basic pay and then so the employer only has to contribute for
    remaining 9%
    OR
    if the employee wants to add more amount to his EPF A/c, can he do so! ?

    3. Is PF is compunded monthly or annually? What are the benefits of contributing for PF?

    4. What are the different rules for withdrawing your PF?

    5. How tax is deducted for withdrawing your PF?
    meaning, when you withdraw your PF money, will it be auto-deducted from your account or have to be paid after
    withdrawing.

    1. The employer’s contribution is separate, employee’s is separate. Employee’s contribution is 12% of basic pay whereas employer’s contribution 12% is extra

    2. Employee can add more but employer’s remain the same, as far as I know.

    3. PF is compounded annually, your interest + principal grows more and more. Normally, no investment instruments give you compound interest. Compound interest is the eighth wonder of the world.

    4. EPF cannot be withdrawn fully, only 50% can be withdrawn. Pre-mature withdrawals attract tax.

    5. Usually, as far as I know, TDS applies to your Pre-matured PF.

    Thank you for your answers Prabha @ madbucks. They are very precise.

    I just want to know how Compound Interest is calculated?

    Meaning, i know that it keeps on adding interest to your previous interest and principal amount but
    how does it actually works with an EXAMPLE.

    For instance, we can take a man is getting a salary of INR 10000/- per month and he is fixed in his deposit and keeps adding 10000/- of his salary every month, also he does not withdraws any amount out of it.

    He deposits that amount into HDFC bank where he gets 4% interest on quarterly basis.

    Also, suppose say he started in the month of January so he got his interest for (January to March) of 30000 on 1st of April.

    The interest which he gets is it fully 4% = 1200/-
    OR
    4% divide by 12 months * 3 months ( 0.04/12 * 3) = 300/-

    Well, all the fixed deposits run on Simple Interests. No private financial guys give you Compound interest because that is a huge loss for them.

    Mostly Compound interest option is given only by the government for the benefit for its people. Few of the best are EPF and PPF(Public Provident Fund). Initially both SI and CI yield same for the first year. Compound Interest benefits you on long term.

    The following link on quora educates you very well..
    https://www.quora.com/What-is-the-difference-between-simple-interest-and-compound-interest-Can-you-give-3-examples-of-where-each-one-would-be-used

    Simple interest is calculated on its principal only, how much ever your interest is, you’re not allowed to add it to your Principal; whereas Compound interest is calculated on Principal+accumulated interest. Automatically you earn more on Compound interest.

    Try comparing your fixed deposit scheme with PPF (Public Provident Fund scheme). PPF is the best investment tool for any Indian, especially on compound interest.

    What is the difference in transferring the PFs of previous organization to the new PF account of the current organization as against linking all the PF accounts to a single UAN?

    Hi Abhinav, linking all accounts to UAN has better advantage than transferring to new PF account. You get complete control of all your PF accounts under 1 UAN. You need not contact your employers for anything.

    Transferring is an old practice, which has less advantage. For e.g.., you woulnt be able to track individual amount of each company PF if your account are clubbed. Have consulted a certified specialist on the front ,and he recommended to go for linking all you PF accounts to 1 UAN rather than linking.

    Thanks for the prompt response!
    Yes I hv linked my previous two PFs under a single UAN. Nw I shl b moving to a 3rd organisation so started wondering wld there be a problem when I want to withdraw at the end i.e aftr 56 yrs ??

    Thank you for your response Prabha.

    Also have a question regarding shares.
    Can it be taken as a indication that if a company sales increases, the price of its shares is also going to increase.

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