3/4/2016 EPFTaxhasyouconfused?

HereishowtodecidebetweenEPF,PPFandNPSYahooIndiaFinance

Fri,4Mar,201611:00PMIndianMarketsareclosed

CloseAd

EPFTaxhasyouconfused?Hereishowtodecidebetween
EPF,PPFandNPS

TheIndianExpressThu3Mar,20169:15PMIST

TheEmployeeProvidentFundTaxannouncedintheUnionBudget201617haseveryonescurryingtowithdrawtheir
deposits.UndertheBudgetproposal,thegovernmentisplanningtotax60percentofEmployeesProvidentFundcorpus
oncontributionsmadeafterApril1,2016.Themovebythegovernmenthassentconfusingsignalsandhasputaspotlight
onretirementproductsavailableinthecountry.

AftertheannouncementoftheEPFtaxintheBudget,thegovernmentcameunderseverepressuretowithdrawtheentire
provision.WhilespeakingatapostBudgetconferencewithindustrychambers,UnionFinanceMinisterMinisterArun
Jaitleysoughttoassuagepeople'sconcernsonWednesdayandsaidhewouldspelloutthefinaldecisionontaxing
withdrawalsfromtheEmployeesProvidentFund(EPF)atthetimeofreplyingtoadebateinParliament.

TheministersaidtheEPFwithdrawaltaxisnotaimedatraisingrevenues,rathertheemphasisofthegovernmentisto
makeIndiaapensionedandinsuredsociety.Notaxwillleviedifthecorpusatthetimeofwithdrawalisinvestedin
pensionbasedannuities,hesaid.

Meanwhile,welookatthethreemajorretirementschemesEPF,PublicProvidentFundandNationalPensionScheme
andwhattheyhaveonofferforyou.

TheEPFisrunbytheEmployeesProvidentFundOrganisation(EPFO),whiletheoldageincomesecurityschemethe
PublicProvidentFund(PPF)issponsoredbythegovernment.TheNationalPensionSchemeissponsoredbythe
PensionFundRegulatoryandDevelopmentAuthority(PFRDA).

AsidefromtheEPFandPPF,theNationalPensionSystem(NPS)isarecententrantinthisspace.ArunJaitleyhassought
tomaketheNPSmoretaxfriendly.The40percentofthecorpusthataninvestorcanwithdrawaftermaturityis
proposedtobemadetaxfree.ThelongtermaimistobringitonanequalfootingwiththeEPFonthetaxationfront.

ThePublicProvidentFundremainstotallyexemptedthroughout.ForPPF,withan8.7percentannualrateofinterest,
theEconomicSurvey2016clearlymentionedthatafterfactoringintaxrateondepositandinterest,theeffectiveinterest
ratecomestoahigh16percent.

TheNPS,ontheotherhand,offersmarketlinkedreturnswithamaximumequityinvestmentof50percentfrom

https://in.finance.yahoo.com/news/epftaxconfuseddecidebetween154500680.html 1/3
3/4/2016 EPFTaxhasyouconfused?HereishowtodecidebetweenEPF,PPFandNPSYahooIndiaFinance

subscribermoneypermittedunderthescheme.Inessence,itprovidesawindowtobeatreturnsfromPPFandEPFinthe
longterm.

EMPLOYEESPROVIDENTFUNDSCHEME(EPF)

Eligibility:EmployeesdrawingbasicsalaryofRs15,000havetocompulsorycontributetotheProvidentfundand
employeesdrawingaboveRs15,000haveanoptiontobecomememberoftheProvidentFund

Wheretoopen:SchemeisprovidedbyEmployeesProvidentFundOrganisation(EPFO)throughorganisationenrolled
withit.Yourofficewillopentheaccountforyouiftheyemploy20personsormore

Investmentlimit:Employeecontributes12percentofbasicsalaryandandequivalentamountiscontributedbythe
Employer.

Returns:EPFfundswillearna8.8percentfor201516,marginallyupfromtheprevious8.75percent.

Duration/maturity:Tilltheretirementoftheemployeeortheemployeeoptingoutof

Loans/Withdrawals:YoucanwithdrawfromEPFaccountforchildrenseducation,marriageofself,childrenand
siblings,purchase/constructionofahouseoranymedicalemergencies.However,withdrawalissubjecttocertain
conditions:

Minimum7yearsofservice

Maximum3withdrawalsduringwhichyouholdtheEPFsAccount

Maximumaggregatewithdrawalwouldbe50%ofthetotalcontributionsmadebyyou.

Formedicalemergencies,thereisnominimumserviceperiod.However,themaximumamountonecanwithdrawis6
timesthebasicsalaryandproofofhospitalisationisrequired.

However,withdrawalforpurchase/constructionofhouseisavailableonlyonceinanindividualsworkinglife.The
minimumserviceperiodis5yearsandthemaximumwithdrawableamountis36timesyourtotalsalary(forconstruction
ofproperty)and24times(forpurchaseofproperty).

TaxBenefits:CurrentlyenjoystheExempt,Exempt,Exempt(EEE)status.However,Budget201617hasstokeda
massivecontroversybyproposingthathasproposedthatonly40percentofthecontributionsmadetoEPFafterApril1,
2016,willbetaxfreeonwithdrawal.Withwidespreadoppositiontothemove,thegovernmentislikelytoreconsiderits
decisionandafinalwordisawaited.

Nomination:Subscribercannominateoneormorepersonbelongingtohisfamily.Ifhehasnofamilyhecannominate
anypersonorpersonsofhischoicebutifhesubsequentlyacquiresfamily,suchnominationbecomesinvalidandhewill
havetomakeafreshnominationofoneormorepersonsbelongingtohisfamily.Youcannotmakeyourbrotheryour
nomineeaspertheActs.

TransferofAccount:Accountistransferablewithchangeofchangeofjobofsubscriber

WATCHVIDEO

PUBLICPROVIDENTFUND(PPF)

Eligibility:Individualscanopenaccountintheirname,alsoopenanotheraccountonbehalfofaminor.Joint/NRI/HUF
accountscannotbeopened.

Wheretoopen:Postoffices,publicsectorbanksandfewprivatebanksofferthegovernmentrunscheme.

InvestmentLimit:MinimumRs500withacapofRs1.5lakhsperannum.Depositscanbemadeinonelumpsumor
in12installmentsperyear.

InterestRate/Returns:8.7perannumwitheffectfromApril1,2015.InterestispaidonMarch31everyyear.Interest

https://in.finance.yahoo.com/news/epftaxconfuseddecidebetween154500680.html 2/3
3/4/2016 EPFTaxhasyouconfused?HereishowtodecidebetweenEPF,PPFandNPSYahooIndiaFinance

calculatedonmonthlybasisontheminimumbalancebetween5thandlastdayofthemonth.

SchemeDuration:15yearswiththeprovisiontoextendinoneormoreblocksof5yearseach.Prematureclosureisnot
allowedbefore15years.

Loans/withdrawals:Availablefromthirdfinancialyear.Partwithdrawalispermittedfrom7thFinancialYear

Taxation:PPFcomesundertheExempt,ExemptandExempt(EEE)categorywhichmakesittaxexemptfrom
investmenttillmaturity.Subscriptionqualifiesfortaxbenefitsunder80CofIncomeTaxAct.

Nomination:Oneormorepersonscanbenominated

TransferofAccount:ThePPFaccountcanbetransferredfreeofchargetoanotherbranch,anotherbankorpostoffice.

NATIONALPENSIONSCHEME(NPS)

Eligibility:Allcitizensbetween18and60yearsasonthedateofsubmissionofapplication

Wheretoopen:AuthorisedPointsofPresence(POP)andalmostallprivateandpublicsectorbanksapartfromseveral
otherfinancialinstitutionsofferthescheme.

Investmentlimit:(ForTier1nonwithdrawable)minimumContributionsisRs500withatotalminimumcontribution
peryearatRs6,000.ForTierII(withdrawable)minimumcontributionsRs250withminimumbalanceofRs2000.No
caponmaximuminvestment.

Returns:NPSoffersmarketlinkedreturns.Beingadefinedcontributionschemewheresubscriberscontributetohis
account,thereisnodefinedbenefitthatwouldbeavailableatthetimeofmaturity.Theaccumulatedwealthdependson
thecontributionsmadeandtheincomegeneratedfrominvestmentofsuchwealth.

Duration/maturity:Maturityofschemeisatage60

Loans/Withdrawals:Onretirement,asubscribercanoptoutofNPS.However,thesubscriberwouldberequiredto
investminimum40percentoftheaccumulatedsavingstopurchasealifeannuity,whileremainingcanbetakenouta
lumpsum.

TaxBenefits:TierIaccountisexempt,exempt,taxed(EET).Theamountcontributedisentitledfordeductionfrom
grosstotalincomeuptoRs1lakh(alongwithotherprescribedinvestments)aspersection80CoftheIncomeTaxAct.

TheUnionBudget201617hasproposedthat40%ofretirementcorpusofasubscriberofNationalPensionScheme(NPS)
atthetimeofretirementwillbetaxexempt.Further,annuitypaymenttothelegalheirafterthedeathofpensionerhas
beenmadeexemptfromtax.

Nomination:Intheeventofdeathofthesubscriber,thenomineecanreceive100percentoftheNPSpensionwealthin
lumpsum.

TransferofAccount:ProvidesfullportabilitywithingeographiesandbetweenPOPs

https://in.finance.yahoo.com/news/epftaxconfuseddecidebetween154500680.html 3/3