The Pension Fund and Regulatory Development Authority (PFRDA) on 7 March 2017 unveiled certain rules for transfer of funds from recognised provident and superannuation funds to the National Pension System (NPS).
The regulator mentioned that as per the provisions of the Income Tax Act, 1961, the amount transferred from recognised provident or superannuation fund to NPS was not treated as income for the current year and hence it is not taxable.
• As per the rules, funds transferred from Provident Fund to the National Pension System will not be taxable.
• The transferred recognised provident fund or the superannuation fund will not be treated as contribution of the current year by employee or employer and accordingly the subscriber cannot make income tax claim of contribution for this transferred amount.
• Any subscriber interested in such a transfer should have an active NPS Tier I account.
• The NPS Tier I account can be opened either through the employer (where NPS is implemented) or through the points-of-presence (POPs) or online through eNPS on the NPS Trust website.
• The subscriber should approach the recognised provident or superannuation fund trust through the current employer requesting transfer to the NPS account.
• The recognised provident fund or the superannuation fund trust may then initiate transfer of the fund as per the provisions of the trust deed read with the provisions of the Income Tax Act, 1961.
• In case of a government or private sector employee, the employee should request the recognised provident or superannuation fund to issue a letter to his present employer mentioning that the amount was being transferred from the recognised fund to the NPS Tier I account of the employee.
The return on NPS for central government employees for one year comes out to be 15.9 per cent while for five years it stands at 11 per cent.
What: Announced by PFRDA
When: 7 March 2017