Once we discuss fashionable retirement pension schemes in India, two plans that high the chart are Staff’ Provident Fund (EPF) and Nationwide Pension Scheme (NPS). Each are aimed toward offering lump sum and month-to-month pension to people submit retirement. However there’s a fundamental distinction between the 2. Whereas, PPF is a curiosity rate-based assured return scheme, NPS is a market-linked funding programme, the place one can choose funding plans and the supervisor based mostly on their aggressive, reasonable and conservative return strategy.
Since NPS is market-linked, there are probabilities that it could actually ship higher returns in the long term than EPF.
Some individuals who desire market-linked returns (NPS) to fastened return (EPF) could need to switch their EPF quantity to NPS.
However the query is whether or not they can do it? Know that it this text, however earlier than that, know what are EPF and NPS?
EPF
EPF is run by Staff’ Provident Fund Organisation (EPFO).
It provides 8.25 per cent annual compound curiosity on an worker’s EPF contribution.
An worker can contribute as much as a most of 12 per cent of their fundamental wage and dearness allowance (DA).
The benefit is the employer can also be mandated to contribute an equal quantity to the worker’s EPF.
Deposits of EPF as much as 1.50 lakh in a monetary yr is tax-exempt in a monetary yr. Curiosity earned and withdrawals are additionally tax free.
NPS
Any Indian citizen from 18 years to 70 years can open an NPS account by visiting Level of Presence – Service Suppliers (POP-SP) or eNPS by PAN and financial institution particulars.
NPS has Tier I account with lock-in interval of 60 years of age, whereas Tier II account with no lock-in interval.
One can open an NPS Tier I account with a Rs 500 contribution and a minimal contribution of Rs 1,000 yr.
The Tier II account could be opened with Rs 250 contribution. It has no minimal stability required thereafter.
Tier I account provides tax profit underneath Sec 80 CCD (1) with within the total ceiling of Rs. 1.50 lakh underneath Sec 80 CCE.
An extra deduction for funding as much as Rs. 50,000 in NPS (Tier I account) is out there completely to NPS subscribers underneath subsection 80CCD (1B).
An employer’s NPS contribution (for the advantage of worker) as much as 10 per cent of wage (fundamental+DA), is deductible from taxable earnings, as much as 7.50 lakh.
There aren’t any tax advantages for Tier II accountholders.
Can one switch EPF to NPS?
Sure, one with Tier I NPs account can switch EPF to NPS.
For that, one must submit the switch request type to the employer.
The employer mentions the switch from the PF/superannuation fund within the comment when importing.
For a non-public worker, a cheque/DD is then issued in favour of Title of Level of Presence, Assortment Account-NPS Belief – Subscriber Title – PRAN’.
To authorities workers, then again, a recognised PF/superannuation fund will problem a cheque/DD in favour of ‘Nodal Workplace Title – Employer Title – Everlasting Retirement Account Quantity (PRAN)’.
