New Delhi: Employees Provident fund can now transfer their retirement savings to National Pension System which comes under the Pension Fund Regulatory and Development Authority (PFRDA).
According to the current rules, 24 per cent of an employee’s salary is diverted to the EPF as a mandatory retirement saving scheme.
Finance Minister Arun Jaitley proposed this proposal to assure to provide an option to employees to exit from EPF and opt NPS. He also stated that employee under certain level of income have the choice to decide if they want to stop their contribution to the EPF or not.
A circular was issued by Arun Jaitley on Tuesday which stated :
• To transfer the retirement savings to the NPS, an active NPS Tier-I account is mandatory under the member’s name. The account can be opened either through the employer where NPS is implemented or an individual can do it online through the NPS Trust website.
• The advantage of the same would be that the transfer income would not be taxable. As the amount transferred would not be treated as income of the current year.
• “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 Finance Ministry’s statement added.
• An individual, either a government or private sector employee must get in touch with his/her concerned PF office through the employer and should make a request to transfer their savings to an NPS account.
• “The recognized 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.
• The latest move would be profitable for the members as the return on EPF savings this year is expected to be 8.65% but the NPS offers multiple asset allocation options and fund managers for its members to choose from, with varying rates of returns.