Retirement Planning: In today's time, most of the people are employed. Many of these people work in the private sector. Out of whose salary, a fixed amount is deposited in the EPF account every month, which the employee gets at the time of retirement. Apart from this, some people also deposit money in NPS (National Pension System) fund for retirement.

Some employees believe that depositing money in NPS gives more returns than depositing money in EPF. Therefore, many people withdraw money from their EPF account and deposit it in the NPS fund. Now the question arises that by doing this, do you get tax exemption every time and how many times can you withdraw money from EPF account and deposit it in NPS fund? If you also have a similar question, then we are explaining it in detail here.

Rules for transfer from EPFO ​​to NPS

To transfer funds from EPFO ​​to NPS, you must have an active NPS Tier-1 account. Its process is done through your employer or you can do it through eNPS portal and Point of Presence (POP). One-time transfer from EPF account to NPS Tier 1 account is tax free under section 10(12) as the amount transferred is not considered as contribution to NPS. Also, it cannot be treated as contribution by the employee/employer in that year for tax deduction.

Benefits of fund transfer from EPF to NPS

• NPS provides an option to increase equity allocation, which can provide higher returns.
• Interest on NPS is tax-free, and 60% of the corpus on maturity is tax-free.

Disadvantages of fund transfer from EPF to NPS

• In NPS, 40% of the corpus has to be mandatorily invested in annuities, which is taxable.
• Entire withdrawals on EPFO ​​are tax-free, and there is high liquidity.

Is it right for you?

Suppose (40 years of age, two children aged 10 and 1, considering ₹25 lakh EPF, ₹1.6 crore equity portfolio), it is very important to know that you have sufficient equity investment before transferring EPFO ​​funds. If you maintain EPFO, you will have more stable and liquid funds at the time of retirement.