April 7, 2017

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How to move funds from EPF to NPS

In the 2017 budget proposal, Pension Fund Regulatory and Development, came up with a procedure to transfer your EPF (Employment Provident Fund) to NPS (National Pension System). This is a one time process for exch individual, which can help you get rid of the EPF, by switching to NPS easily without any hurdle. 


Under the NPS norms, government allows a subscriber to create a retirement corpus upto Rs 1.5 lakh, with tax benefits under Section 80C and 80CCD (1B) in the income Tax Act. Government has simplified its rules to help employees to move between the respective funds. This transfer can be performed only once by an individual.

Steps to move funds from EPF to NPS

1. In order to make the transfer, one needs to have an active Tier 1 account with NPS, with your company showing POPs (Points of Presence) or eNPS portal.
2. A recognized EPF needs to submitted through the request of your employer, which authorizes a sort of attestation that you have been working with that company. 
3. EPFO, is responsible for initiating this fund transfer. Based on the verification and reason for your request, the trust will forward the transfer process. They generally issue a DD (Demand Draft) or cheque for these transfers.
4. Now the employee has to request a recognized Provident fund to issue a letter to his/her current employer or POP, stating all the details including the amount, which is being transferred to the employee from the Recognized Provident Fund, which is supposed to get credited in the NPS account of employer. The transaction will only take place after the sanction by the employer through the letter.
5. After the last process is completed, NPS and POPs will collect the transferred amount, uploading the same to your NPS account account.

Taxation Rules of this Transfer
Transferring funds from EPS to NPS, is not treated as income from the current year, which made it tax free. However an employee, won’t be able to claim tax benefits under Section 80CCD for transfer in these accounts.

Is it a smart move?
Unlike EPF, NPS’s returns are completely based on fund performance. EPF offers the same tax benefits, guaranteeing liquidity and returns, which are declared every year by EPFO. NPS doesn’t offer the same retirement and pension benefits offered by EPF. Only 60% corpus can be withdrawn by you in an NPS, leaving the remaining to be used for annuity purchase, even during retirement. Make sure you have taken to into consideration all the above mentioned points, as once you make the move, there is no going back. 


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