3 PF Withdrawal Mistakes That Employees Often Make

In 1952, Employees’ Provident Fund and Miscellaneous Provisions Act was rolled out according to which the employees earning less than INR 15,000 a month have to contribute 12% of their Basic Pay + Dearness Allowance to the EPFO accounts. Particularly for organizations that employ more than 20 staff members have to get registered under this post-retirement income and benefits scheme. So, clearly, it is not a new concept in the country. However, some working professionals still feel confused about a lot of factors associated with it. For instance, answers to common questions like what is PF, how to withdraw PF online, how to calculate PF amount and others have not reached the masses properly. Even if people have heard the name of EPF, they do not have the required in-depth comprehension that every contributor must have.

So, assuming that the basic essence of EPF is gained by the maximum employees, let us talk about 3 main mistakes that they still make and how to resolve the same:

Withdrawing PF Amount On Every Job Switch

This is the biggest and the most grave mistake that almost every employee tends to make. In a hurry to enjoy the money, people withdraw the amount too soon, not realizing that it is not at all the right choice to make. It is always wiser to avail the option of EPF transfer by continuing with the same account under a new employer. For that, it is imperative to give your existing Universal Account Number (UAN) and the Adhaar Card details to carry on with the same balance, just adding to it. Two UANs for one Adhaar Card are impossible to be generated. So, if you do not provide the information to your new recruiter, the previous PF account will lapse and you will have to start saving all over again.

Going For An Online PF Withdrawal

Earlier, people used to follow the traditional way of withdrawing their EPF amount by writing and submitting applications, standing in queues to get papers signed and waiting to get their money. Now, with the advent of technology, it is possible and also easier to withdraw the PF amount online. But, due to lack of awareness and high level of discomfort, employees either don’t know how to withdraw PF online or refrain from using the online system. This is a bad decision, given that it is highly time and energy-saving and less complicated.

The Myth of Complete PF Tax Exemption

If you decide not to withdraw the PF amount in your entire career, it would not mean that the money goes away! You will then be eligible for pension benefits post-retirement. Arising from this fact, there is a myth that PF is entirely tax exempt which is not true. Only when the PF account is 5 years old, it can be considered exempt from tax. If you have withdrawn any amount of money before the span of 5 years, tax will be deducted as per salary from the same.

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