You can switch from EPF to NPS

You can switch from EPF to NPS

Regulator notifies procedure for move

More than eight crore members of the Employees’ Provident Fund, can now opt to move their retirement savings to the National Pension System overseen by the Pension Fund Regulatory and Development Authority (PFRDA) – over two years after Finance Minister Arun Jaitley had promised such an alternative for employees in the Budget for 2015-16.

The PFRDA notified the procedure for EPF members to transfer their investments to the National Pension System or NPS on Tuesday.

Terming members of EPF and Employees’ State Insurance Corporation (which provides medical care to organised sector workers) as “hostages, rather than clients”, the finance minister had said such workers’ incomes suffer due to high statutory deductions towards EPF and ESIC.

He had promised to provide employees the option to leave the EPF and opt for the NPS and had also said that employees below a certain level of monthly income could decide if they wanted to stop their own contributions to the EPF. In all, 24% of an employee’s salary is diverted to the EPF as a mandatory retirement saving scheme.

Active NPS account

According to the rules, the subscriber looking to transfer funds from EPF to NPS must have an active NPS Tier-I account, which can be opened either through the employer where NPS is implemented or online through eNPS on the NPS Trust website.

The amount transferred from a recognised Provident Fund or superannuation fund to NPS would not be treated as income of the current year and hence, would not be taxable.

“Further, the transferred recognised Provident Fund/Superannuation Fund will not be treated as contribution of the current year by employee/employer and accordingly the subscriber would not make Income Tax claim of contribution for this transferred amount,” the notification clarified.

While the return on EPF savings this year is expected to be 8.65%, the NPS offers multiple asset allocation options and fund managers for its members to choose from, with varying rates of returns.

The subscriber, either a government or private sector employee, must approach the concerned PF office where their money resides, through her or his employer and request to transfer their savings to an NPS account.

“The recognised Provident Fund/Superannuation Fund Trust may initiate transfer of the Fund as per the provisions of the Trust Deed read with the provisions of the Income Tax Act, 1961,” the PFRDA said.

In the case of a government employee, the recognised Provident Fund or the superannuation fund can issue the cheque or draft in the name of: the Nodal Office Name<>Employee Name<> Permanent Retirement Account Number (PRAN).

In case of a subscriber currently employed in the private sector, the cheque or draft can be made in the name of: Name of Points of Presence, Collection Account-NPS Trust<>Subscriber Name<>PRAN.

Source : http://www.thehindu.com/business/you-can-switch-from-epf-to-nps/article17423677.ece