The Government of India will pay the employer and employee contribution to EPF account of employees for another three months from June to August 2020. The benefit is for establishments with up to 100 employees and where 90% of those employees draw a salary of less than Rs 15,000 per month. The contribution to EPF is reduced to 10% from 12% for non-government organisations.

The regulatory body of the National Pension System (NPS), the Pension Fund Regulatory and Development Authority (PFRDA) had issued a circular on the process for transferring the funds from the Employees’ Provident Fund (EPF) to NPS. Both NPS and EPF are government-backed schemes. These investment options are covered under Section 80C of the Income Tax Act, 1961.

The amount transferred from the EPF account to NPS is not considered as an income in the current year in the hands of the employees. Furthermore, the transferred amount is not considered as a contribution to the NPS account in the current year.

Hence, the employee moving the amount from EPF to NPS is not eligible for deductions under Section 80CCD of the Income Tax Act, 1961, in that year. You might be having certain questions as to how NPS differs from EPF and what is the benefit of transferring the amount from EPF to NPS. The following correlation of the two schemes might address some of your questions:


EPF predominantly invests in government bonds, securities, and debt instruments. The equity exposure is very minimal in EPF. Whereas, NPS allocates nearly 50% of the corpus for equity-linked instruments. Moreover, the NPS scheme offers flexibility in choosing the fund manager and asset portfolio.

2.Return on Investment

The EPF investment earns a fixed rate of interest, 8.5% for FY 2020-21, on an annual basis. The rate of interest might vary each year, depending on the market fluctuations, while NPS does not provide guaranteed returns as it invests predominantly in the equity-linked instruments.


If an employee quits his/her job and fails to find another employment within two months, then they are allowed to withdraw the entire EPF investment. Hence, EPF can be considered ‘liquid’ to some extent. NPS allows employees under the age of 60 years to withdraw only up to 20% of the investment in a lump sum. The remaining amount goes towards annuity plans through which an employee would receive a monthly pension. However, employees aged above 60 years are allowed to withdraw up to 60% of the fund balance in one shot.


Lump sum EPF withdrawals made after five continuous years of service is made completely tax-free, while the NPS withdrawals more than 40% of the accumulated corpus is taxable.

5.Steps to transfer EPF amount to NPS

  • You need to have a Tier-1 NPS account, without which you cannot transfer the amount from EPF to NPS.
  • Submit the transfer form to your employer, who will then initiate the transfer on your behalf.
  • You need to request a letter declaring the amount transferring from EPF to the Tier-1 NPS account of the employee. The employer will then have to mention the transfer from the PF/superannuation fund in the remark when uploading.
  • If you are a government employee, then the recognised PF/superannuation fund will issue a cheque/DD in favour of ‘Nodal Office Name – Employer Name – Permanent Retirement Account Number (PRAN)’.
  • If you are a private employee, then the cheque/DD will be issued in favour of ‘Name of Point of Presence, Collection Account-NPS Trust – Subscriber Name – PRAN’.

Traditionally, EPF is the most favoured retirement planning scheme. NPS is relatively new, but it is slowly gaining popularity among young investors. To make NPS more popular, the government has offered extended tax benefits (Section 80CCD-1B) of Rs 50,000 for investing in NPS. This deduction is over and above the Section 80C limit.

Both EPF and NPS have their advantages and drawbacks. You need to consider your requirements before deciding which is more suitable before investing in any of the two.