Can one transfer their EPF to NPS? What is the procedure for that?

When we talk about popular retirement pension schemes in India, two plans that top the chart are Employees' Provident Fund (EPF) and National Pension Scheme (NPS). Both are aimed at providing lump sum and monthly pension to individuals post retirement. But there is a basic difference between the two. While, PPF is a interest rate-based guaranteed return scheme, NPS is a market-linked investment programme, where one can select investment plans and the manager based on their aggressive, moderate and conservative return approach.

Since NPS is market-linked, there are chances that it can deliver better returns in the long run than EPF.

Some people who prefer market-linked returns (NPS) to fixed return (EPF) may want to transfer their EPF amount to NPS.

But the question is whether they can do it? Know that it this article, but before that, know what are EPF and NPS?

EPF

EPF is run by Employees' Provident Fund Organisation (EPFO).

It offers 8.25 per cent annual compound interest on an employee's EPF contribution.

An employee can contribute up to a maximum of 12 per cent of their basic salary and dearness allowance (DA).

The advantage is the employer is also mandated to contribute an equal amount to the employee's EPF.

Deposits of EPF up to 1.50 lakh in a financial year is tax-exempt in a financial year. Interest earned and withdrawals are also tax free.

NPS 

Any Indian citizen from 18 years to 70 years can open an NPS account by visiting Point of Presence - Service Providers (POP-SP) or eNPS through PAN and bank details.

NPS has Tier I account with lock-in period of 60 years of age, while Tier II account with no lock-in period.

One can open an NPS Tier I account with a Rs 500 contribution and a minimum contribution of Rs 1,000 year.

The Tier II account can be opened with Rs 250 contribution. It has no minimum balance required thereafter.

Tier I account offers tax benefit under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.50 lakh under Sec 80 CCE.

An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B).

An employer's NPS contribution (for the benefit of employee) up to 10 per cent of salary (basic+DA), is deductible from taxable income, up to 7.50 lakh.

There are no tax benefits for Tier II accountholders. 

Can one transfer EPF to NPS?

Yes, one with Tier I NPs account can transfer EPF to NPS.

For that, one needs to submit the transfer request form to the employer.

The employer mentions the transfer from the PF/superannuation fund in the remark when uploading.

For a private employee, a cheque/DD is then issued in favour of Name of Point of Presence, Collection Account-NPS Trust – Subscriber Name – PRAN’.

To government employees, on the other hand, a recognised PF/superannuation fund will issue a cheque/DD in favour of ‘Nodal Office Name – Employer Name – Permanent Retirement Account Number (PRAN)’.