EPFO has made amendments to its functioning related to PF account transfers. Starting April 1st 2024, EPFO will automatically transfer existing PF accounts of member employees to new accounts whenever they switch jobs. Earlier, all members had to place a fresh request for the PF account transfer once they changed jobs. There will be no modification for employees who won’t change jobs and their PF account will continue receiving funds as usual.
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Decoding the Functioning of an EPF Account
When an individual joins the formal workforce, they are assigned a UAN (Universal Account Number) which is a unique ID provided by EPFO to every individual for life.
The employer then opens a PF account in the name of the employee where all EPF contributions by both the employee and the employer are deposited. EPFO also deposits the yearly interest on the available contribution in the same PF account.
This PF account is linked to the UAN and is verified using the Aadhaar of the employee.
When the employee switches the job, the new employer opens a new PF account for the employee and attaches it to the existing UAN. Fresh contributions by the employee and the new employer are submitted to this account.
Once a new PF account is opened, neither the employee nor the previous employer can make any contributions to the old PF account.
Earlier, the employee had to place a request online through the EPF member portal to transfer funds from the old PF account to the new account. In case of multiple old PF accounts, a transfer request had to be placed for every such account.
To do this, the employee needed to have the UAN linked with Aadhaar, PAN and an active bank account and all these details had to be approved by the employer.
Also Read: Know everything about EPF
Why an employee had to transfer old PF accounts to the new one?
An employee would continue to get interest on the contributions in the existing PF account at the rate as notified by EPFO every year. However, since no fresh contributions are made to the old account, the interest earned on the PF would be taxable at a rate as per the income tax slab the employee falls into.
For example, if an employee receives an interest of Rs. 10,000 on the amount accumulated in the PF account in which no fresh contributions were made in the past year, the interest amount of Rs. 10,000 would be added to his taxable income. However, if the same account was transferred to the new PF account where fresh contributions are made every month, the same interest amount of Rs. 10,000 would have been tax-free.
Now, with EPFO making this process automated, the employee won’t have to place the transfer request every time the job is changed.
