The ability to maintain multiple provident fund accounts under the same universal account number (UAN) is proving useful in the midst of increased job-hopping these days for employees looking for better salaries.
But maintaining multiple provident fund accounts is not advisable. So, before you decide to merge your provident fund accounts with different employers, here are a few basics to know.
EPFO: The Employees’ Provident Fund Organisation (EPFO) is the umbrella organisation managed by the government, which is responsible for overseeing provident funds, a mandatory retirement investment scheme. It combines the employee and employer contributions to provide financial support during the retirement days of the employees.
UAN: The UAN is a 12-digit number allotted to every employee with a Provident Fund account. When EPFO member employees hop jobs, multiple member IDs are assigned to them under the same UAN.
This unique number links all member IDs, thus making it easier to access member details. Employers open different PF accounts under the same UAN for their employees, but if employer is not informed of the previous UAN, the accounts are not merged and they remain separate.
According to the EPFO: “UAN stands for Universal Account Number to be allotted by EPFO. The UAN will act as an umbrella for the multiple Member IDs allotted to an individual by different establishments. The idea is to link multiple Member Identification Numbers (Member Id) allotted to a single member under single Universal Account Number. This will help the member to view details of all the Member Identification Numbers (Member Id) linked to it.”
Why You Shouldn’t Have Two UANs
EPFO rules discourage having more than one UAN. While there are no penalties for having multiple accounts, there are significant implications on your tax and interest income.
“If a member is already allotted UAN then they are required to provide the same on joining new establishment to enable the employer to in-turn mark the new allotted Member Identification Number (Member Id) to the already allotted UAN,” EPFO says.
The unused PF account stops accruing interest. “If no contribution is received into a PF account for three consecutive years the account shall not earn any interest after three years from the stopping of contribution,” EPFO says.
Also withdrawals will attract higher interests if accounts are not merged. Withdrawals from EPF accounts are tax-free after five years of continuous service. If an individual’s tenure with a company is less than five years and the total investment in their PF account is below Rs 50,000, then also no tax liability is imposed upon withdrawal.
However, if the withdrawal amount exceeds Rs 50,000, a 10 per cent tax deducted at source (TDS) is applicable if one has not been in service for a total of five years.
When merging multiple PF accounts, the EPFO combines an individual’s entire employment history.
Let’s say someone has worked for two years each at four different organisations. If his accounts are merged, his total tenure will be counted as eight years in total. However, if the PF accounts are not merged, each of his two-year tenure will be treated separately, leading to a 10 per cent TDS being imposed on each withdrawal.
How To Merge Accounts
To merge your different PF accounts, you will first need to declare your UAN to your subsequent employers in Form-11 (Declaration Form). The EPFO facilitates portability by linking different Member IDs if the employers have verified the employee’s know your customer (KYC) details.
But if you already have different EPF accounts under different UANs, you can send an email to the EPFO office. The EPFO verifies the UAN numbers and merges the accounts once the application is received.
Additionally, the EPFO online portal offers the option of “One Employee – One EPF Account”.
After selecting this option, users can submit a request to merge their PF accounts. They will need to provide their registered mobile number and current activated UAN, current member ID.
On validating these credentials, EPFO will allows them to link their previous UANs. The EPFO will process your request to merge PFs and once settled, you can initiate the transfer of funds between PF accounts.
