Changing jobs can be both a happy as well as an unpleasant moment in a person’s life. Nowadays youths believe in shifting jobs more often than it was before. Reasons may be many like better opportunity, higher salary, a better role, a change in designation, perks and proximity to work place etc. However, very few know how to settle their financial dues with their previous company.
Every company provides an employee with a salary account. With a new job it’s a possibility that you would be getting a new salary account and chances are that it may be from a different bank. This can get you multiple bank accounts. And after 3-6 months the old salary account automatically converts into a savings bank account which would require you to hold a minimum balance according to a banks terms and condition. In case of non salary account you would have to keep it active so that it does not become dormant. There also is a service charge which is levied which may be Rs 1000 again varying upon banks. An annual penalty of Rs 500-1000 is charged if the account is inoperative or dormant, this fee is known as non maintenance fees.
Transferring your EPF corpus
As far as Employee Provident Fund is concerned an employee has an option of either withdrawing the whole amount or transferring the existing account to the newly made PF account. Withdrawal is not an advisable option as it may take around 3-6 months. It also reduces your retirement corpus and also the employees lose the advantage of compounding. Once the PF is withdrawn it is added to the salary and is subjected to an income tax. While on the other hand transferring the PF leads to tax saving. Additionally there are no headaches involved as it is the responsibility of the HR of the company.
While changing jobs it’s very important to take into consideration your tax liability. One must declare the deductions to the new employers if you happen to switch your jobs in between the year.
The tax liability may fall but at the end of the year while filing returns it would be taken into account and it will result in higher tax liability. In order to avoid double taxation always remember to collect Form 16 from your employer.