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How to transfer balance from EPF to NPS – Should you transfer?

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PFRDA has now notified the procedures (on 6th March 2017) through which EPF members can transfer their PF balance to NPS (New Pension System). In Budget 2016, one of the proposals  was to provide one time portability or transfer option from EPF to NPS.

In this post, we will focus on procedures to transfer balance from EPF to NPS, current hurdles and whether it makes sesnse to transfer? 

Requirements and Process for transferring EPF to NPS

  • You need to have a NPS Tier 1 Account. You can open NPS account through employer, banks/entities registered as PoPs, or online through eNPS Portal.
  • You need to submit the transfer form to your employer who will then initiate the balance transfer from EPF to NPS
  • The employee should request the PF/Superannuation fund to issue a letter to his present employer / PoP mentioning that the amount is being transferred from the fund to be credited to the NPS Tier-1 account of the employee. The present employer or Point of presence (POP) i.e., the nodal office while uploading the fund has to mention the transfer from PF/superannuation fund in the remarks column while uploading.
    • 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.
  • Tax Treatment
    • PFRDA has clarified that the transfer from EPF to NPS will not be treated as Income and not taxable.
    • You cannot claim deduction u/s 80CCD for the transferred amount to NPS. This section allows deduction for new investment in NPS and not transfer.

Current Hurdles and Challenges

1) Transfer is not yet possible for ALL – The circular does not tell that you cannot transfer the money from your EPF account to the NPS just yet.  EPF account is governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) and unless the Act is amended—which is still being deliberated upon—a transfer is not possible.  However, Individuals who have superannuation funds, or a provident fund not covered by the EPF Act, can get their money transferred if the trust deed allows the transfer.

2) Opting for the NPS would also mean the member exits from Employees Deposit Linked Insurance as well as the Employees’ Pension Scheme (EPS). it is not clear, what will happen to the amount mandatorily deducted from the employer’s contribution and put into the EPS.

Should you consider transferring balance from EPF to NPS

  • EPF provides more than 8% fixed and tax free return which is quite good.
  • To get benefit of NPS, you do not need to transfer funds from EPF, you can open an NPS in parallel.
  • NPS does offers multiple asset allocation options and fund managers for its members to choose from, with varying rates of returns.

I think you should not rush to transfer your EPF to NPS till we get more clarity.

If you have any queries related to this article or any other personal finance query ( Investment, Taxation etc), please comment below

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About wealth18

The author is a Chartered Accountant and loves to write about Personal Finance, Wealth Management, Taxation etc. Disclaimer - The articles on this website is for informational and knowledge purposes and should not be treated as financial advice, Please consult your financial advisor before taking any investment decision.

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