How to Transfer Your EPF Balance to NPS Seamlessly

What is NPS?

The National Pension System (NPS) is a voluntary retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). By enabling members to invest in a variety of asset types, NPS seeks to ensure financial stability after retirement.

Key Features of NPS:

• All Indian nationals aged 18 to 70 are eligible.

• Subscribers build up a corpus over time by making consistent contributions towards retirement.

• 60% of the corpus can be taken out tax-free at retirement, with the remaining 40% requiring to be utilised to buy an annuity.

• Provides two categories of accounts:

  • Tier I (mandated retirement savings with withdrawal limits).

  • Tier II (flexible withdrawals from a voluntary savings account).

• Tax benefits under Sections 80CCD(1), 80CCD(1B), and 80CCD(2) of the Income Tax Act.

• Pension Fund Managers (PFMs) oversee investments, distributing money across various kinds of assets.

For those looking for flexible investing options and market-linked returns, NPS is the best choice.

What is the difference between EPF and NPS?

While both NPS and EPF enable people to save for retirement, there are several significant differences between them, including withdrawal policies, return potential, and structure.

Feature	EPF	NPS
Regulatory Body	EPFO (Employees’ Provident Fund Organisation)	PFRDA (Pension Fund Regulatory and Development Authority)
Investment Type	Fixed interest rate (declared by the government)	Market-linked (various asset classes)
Eligibility	Mandatory for salaried employees (private and government)	Voluntary for all Indian citizens
Employer Contribution	12% of basic salary (for salaried employees)	Optional
Liquidity	Partial withdrawals allowed under specific conditions	Tier I has limited withdrawals; Tier II is flexible
Returns	Fixed (historically around 8%)	Variable (based on market performance)
Tax Benefits	Exempt-Exempt-Exempt (EEE)	Partial tax exemptions, with 60% corpus tax-free at retirement

 

How to transfer your EPF balance to NPS?

The EPF to NPS transfer online process is straightforward and does not require withdrawing funds. Here’s how to do it:

1. Check eligibility

• You must have an active NPS Tier I account.

• Your employer must be registered under NPS if you are a salaried employee.

2. Request a transfer letter from your employer

• Submit a request to your employer, specifying your EPF balance transfer to NPS.

• The employer will issue a letter to the EPFO, confirming the amount to be transferred.

3. Submit the transfer request to EPFO

• Log in to the EPFO Member Portal using your UAN and password.

• Navigate to the "Transfer to NPS" option.

• Enter your Permanent Retirement Account Number (PRAN) linked to NPS.

• Upload the employer’s transfer letter as part of the request.

4. EPFO processes the transfer

• EPFO verifies the request and transfers the EPF corpus to NPS via an account payee cheque or digital transfer.

• The transferred amount is classified as a subscriber contribution in NPS.

5. PFRDA updates your NPS account

• Once funds are credited, PFRDA will update your NPS Tier I balance.

• You can track the status in your NPS account dashboard.

How will NPS allocate your funds?

NPS investments are distributed across four asset classes:

• Equity (E): High-risk, high-return potential.

• Corporate Bonds (C): Consistent returns at a moderate risk.

• Government Securities (G): Guaranteed returns at minimal risk.

• Alternative Investment Funds (A): High-risk investments such as real estate and private equity.

Subscribers can choose either:

• Active Choice: Self-decided allocation

• Auto Choice: Age-based allocation with a gradually decreasing equity exposure.

How does EPF deal with withdrawals?

When can you withdraw from EPF?

• Full withdrawal: Allowed at retirement (age 58).

• Partial withdrawals: Permitted for medical emergencies, home loans, education, etc.

• Before five years of service: Attracts tax liabilities.

Are there any tax benefits in this transfer?

Tax benefits of EPF withdrawals:

• If withdrawn after five years, the amount is tax-free.

• If withdrawn before five years, it is taxable under the individual’s income slab.

Tax benefits of NPS contributions:

• Section 80CCD(1B): Additional ₹50,000 deduction.

• Section 80C: Deduction up to ₹1.5 lakh.

• Employer’s contribution: Up to 10% of salary is tax-exempt.

• Retirement benefits: 60% of corpus tax-free, 40% used for annuity purchase.

Conclusion

Transferring EPF to NPS online offers a market-linked growth option for retirement savings. The process is tax-free and irreversible, requiring employer involvement for EPFO approval. Once transferred, funds follow NPS withdrawal rules until retirement. While EPF ensures stable returns, NPS offers higher growth potential. Choose based on your risk appetite and financial goals. While planning for retirement, it’s equally important to protect your assets today. 

FAQs

1. Can I transfer EPF to NPS without withdrawing funds?

No, EPF to NPS transfer online is not allowed directly. EPF and NPS are governed by different regulatory bodies, making direct transfers impossible. You must withdraw EPF funds and reinvest them manually in NPS.

 

2. How to transfer EPF balance to NPS without tax deductions?

To avoid tax, withdraw EPF only after five years of continuous service. Once withdrawn, deposit the amount in NPS Tier I and claim deductions under Section 80CCD(1B) (up to ₹50,000) for additional tax savings.

 

3. Is NPS better than EPF?

EPF offers fixed returns and is low-risk, while NPS provides market-linked growth with higher returns but some risk. Choose EPF for stability and NPS for long-term wealth creation based on your risk tolerance and financial goals.