Shifting jobs? Follow these financial dos and don'ts

While shifting jobs, consider the following financial aspects to ensure a smooth transition:

Bank accounts

With each new job, you are likely to have a new salary account. However, holding multiple salary accounts is not advisable. When you change jobs, your earlier account gets converted into a regular savings account after three-six months.

Typically, banks are supposed to track salary accounts for salary credits during this period. Once converted, you will lose the perks attached to a salary account.

For instance, it will no longer be a zero-balance account and you will have to maintain a minimum average quarterly balance (AQB), at par with other savings accounts.

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This could be around Rs 10,000-25,000. Charges will be levied for non-maintenance. These differ for each bank, but could even be as high as Rs 750-1,000 a quarter.

You will also have to routinely use the account to keep it active.

According to a RBI directive, an account automatically gets classified as inoperative or dormant if there are no 'customer-induced transactions' for over 24 months. In this case, you will be charged an annual penalty of Rs 500-1,000.

If your balance dips below the AQB requirement, you will be charged non-maintenance fee as well.

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Transferring your EPF corpus

You have two options with regard to your Employee Provident Fund corpus - either withdraw it and open a fresh account with your new employer or transfer your existing account.

Withdrawal of the corpus can take three-six months or even more. One is, however, rarely advised to do so.

First, it will reduce your total retirement corpus over time, as you will have to forego the advantages of compounding.

Also, each time you withdraw this amount (within five years), it will be added to your salary income and taxed accordingly.

On the other hand, if left untouched, it is completely tax-free. Transferring the account would take about three months. It is taken care of by the human resource departments of your previous as well as the current employers.

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Tax matters

Your employer computes your tax liability for the year (deducted on a monthly basis) after factoring in the basic exemption limit applicable and the investments made up to Rs 1 lakh under Section 80C of the Income Tax Act.

If you switch jobs midway through the year and do not declare the earlier deductions to your new employer, he will use the same calculation to compute your tax liability.

So, your tax benefits will be calculated twice and, as a result, your tax liability will fall. However, while filing returns, this anomaly will be taken into account.

And, the actual liability will be higher. Also, do not forget to collect Form 16 from your ex-employer at the end of the financial year to ensure you have received the tax benefits and there is no double calculation of your tax liability.