The National Pension Scheme (NPS) has been gaining popular investment views from many of the tax saving investors.
Keeping the same in line, during the recent budget of 2016-17, the government had announced the opportunity for all the subscribers of recognized ‘Provident Funds’ and ‘Superannuation Funds’ to transfer their accumulated corpus funds from their respective schemes to National Pension System (NPS) without any tax implication.
The interested subscriber needs to follow the below procedure to complete the transfer procedure of PF or superannuation fund to NPS:
- Active NPS Tier 1 account: The subscriber must open and register for an NPS account through the Points-of-Presence (POPs) or online through eNPS on the NPS Trust website – www.npstrust.org.in
- Approach the PF department: The subscriber should approach the Recognized Provident Fund/Superannuation Fund Trust through the current employer by giving request for transfer to his/her respective NPS account.
- Release of funds: The Recognized Provident Fund/Superannuation Fund Trust may initiate transfer of the Fund by issuing the cheque/draft in the name of:
- In case of government employee: Nodal Office Name (PAO or CDDO Name) Employee Name : PRAN (12 Digit No.)
- In case of subscriber presently under Private Sector including All Citizen Model: POP (Name of the POP) Collection Account-NPS Trust: Subscriber Name: PRAN (12 Digit No.)
- Letter of receipt of funds: The employee should request the Recognized Provident Fund/Superannuation Fund to issue a letter to his present employer informing that the amount is being transferred
The transferred Provident Fund/Superannuation Fund will not be treated as the contribution of the current year by employee/employer and accordingly, the subscriber would not make Income Tax claim of contribution for this transferred amount.
What is National Pension Scheme?
The National Pension Scheme, which is the lowest market-related pension plan among all other pension plans (FPE, PPF and mutual funds), suggests that the maximum number of sales would have been recorded. But due to too low wage incentive/commission to intermediaries, it does not favor them.
Types of National Pension Schemes (NPS):
It is a basic retirement account with limitations on withdrawal
- Before age 60, only 20% of the contribution can be withdrawn, while the remaining 80% must be used to purchase the annuity from a life insurer. Annuity Is a series of payments made at fixed time intervals. Annuity plans require the insurer to pay the insured income at regular intervals until the death or the maturity of the plan.
- * After reaching retirement age (60), the contribution of about 60% can be withdrawn and the remaining 40% must be used again to purchase the pension for licensed life insurers.
- There is a voluntary savings option that a person can withdraw unlimited money.
The benefits of national pension scheme
The budget proposed an additional deduction of Rs 50,000 if you invest in NPS Finance Minister Arun Jaitley announced an additional tax deduction of Rs 50,000 for those investing in the NPS under the 80CCD (1B) in his budget speech