Not only the monetary loss due to tax outgo, but the continuation benefit in order to get pension under the Employees' Pension Scheme (EPS) may also be lost.
Mohini (name changed) moved from Rajasthan to Noida in UP to join a reputed media organisation without waiting for the previous employer accepting resignation and relieving her. As a result she didn’t have all the information related to previous employment that were needed to fill the joining form.
So, at the time of changing her job, she couldn’t provide the new company her existing UAN (Universal Account Number) and her new employer created a new UAN for her and completed the KYC process by linking it with her PAN and Aadhaar.
When she tried to activate her new UAN, she got the message that the UAN was already active. However, when she tried to log in to view her EPF (Employees’ Provident Fund) passbook, it was showing that the UAN was not activated. She tried the process several time from different computers, but was unable to proceed.
When contacted to get the problem solved, an official with the Public Relation (PR) department at the head quarter of Employees’ Provident Fund Organisation (EPFO) said, “Earlier there was no problem in creating multiple UAN for a member and transfer the EPF money from previous organisation to the PF account of new organisation. However, the rule has now been changed and a PAN holder may now have only one UAN. As the member (Monini) already has an active UAN registered against her PAN, she is getting the message that her UAN is already activated, but the new UAN can’t be used unless the old UAN is closed.”
When asked how the EPF balance available with old organisation may be transferred to the new organisation, the official said, “It’s not possible, as the new UAN can’t be activated until the old one is closed. So, the member has to withdraw the money from old PF account and close the UAN.”
This puts Monini in big trouble, as she worked in the old organisation for about 3 years only and withdrawing the amount means she has to pay tax on it. Moreover, as she didn’t have 5-year PF contribution period, whatever tax deductions she enjoyed u/s 80C of the Income Tax Act on account of PF contribution during her service period with the old employer, all the benefits will also be reversed.
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So, not only the benefits will be reversed and 10 per cent TDS on the PF money will be deducted from the PF withdrawal amount, but the amount will also be added to her taxable income, which may result in more tax outgo, if she falls in higher tax bracket.
Not only the monetary loss due to tax outgo, but she will also lose the continuation benefit in order to get pension under the Employees’ Pension Scheme (EPS), which is part of EPF and contribution for which is made out of the matching contribution made by the employer.
So, whenever you change your job, don’t forget to mention your existing UAN to the new employer, so that the PF accounts of both previous and new employers may be linked to the same UAN, facilitating you to transfer money from the old account to the new one.
Even if you have some PF money accumulated with an old organisation of pre-UAN period, use physical application form to transfer the money. Otherwise, your money will get stuck, if a new UAN is opened, as you won’t be able to activate it to do any transaction.