FAQs
Public Provident Fund
1. Can I withdraw from PPF account before maturity?
Yes, one can withdraw from PPF account after the expiry of five years from the end of the year in which the account was opened.
2. Can I take a loan against my PPF account?
Yes, an account holder can get loan against the PPF account from the 3rd to 6th year of PPF account opening. The PPF loan interest is 1%.
3. What options do I have when my PPF account matures or completes 15 years?
When your PPF account matures, you have the below mentioned options:
a) You may withdraw the amount along with accumulated interest.
b) You may continue the PPF account for a block of 5 years by continuing to make contributions.
c) You may keep the PPF account as it is and continue to earn interest on the account even after maturity without making further contributions.
4. If I made a contribution online to PPF on the 5th of April and it was a Sunday, would the contribution qualify for interest for that month?
If the funds contributed have been credited to the PPF account on or before the 5th of the month, the contribution would receive the interest applicable for that month.
5. Who is eligible to open a PPF account?
Individuals who are residents of India are eligible to open their account under the Public Provident Fund scheme.
6. What is the minimum deposit under PPF?
A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account.
7. What is the maximum amount that can be deposited under PPF?
A maximum deposit of Rs.1.5 lakhs can be made in a PPF account in any given financial year.
8. What is the current rate of interest in PPF?
The current rate of interest is 7.1% per annum compounded annually.
9. What is the maturity period for PPF?
15 years and in blocks of 5 years thereafter
10. Can joint account be opened under PPF?
No, only single holding is allowed.
11. Is interest under PPF taxable?
Interest is totally tax free
12. Is withdrawal permissible under PPF?
Withdrawal is permissible every year from 7th financial year from the year of opening account.
13. Can I make deposits in installments?
Deposits can be made in lump-sum or in 12 installments.
14. Can I keep my PPF account active after it matures without making any fresh contributions?
After your PPF account matures, you need not withdraw and can still keep it active even without making any fresh contributions. The amount in the PPF account will continue to earn tax free interest.
One withdrawal is allowed per financial year.
15. Can I withdraw from PPF account if I have extended by 5 years after the maturity of the account?
Yes, you can withdraw once in a financial year but the total amount of all withdrawals in the 5 year extension can not be more than 60% of the balance amount at the beginning of the extension.
16. Can I open an account in the name of a minor?
Certainly. Under the Public Provident Fund Scheme, an individual may open one Public Provident Fund account on behalf of a minor child of whom he is the guardian.
17. In the event of the death of a guardian, in relation to a minor, should the PPF account in the name of the minor be closed and a new account opened?
In such a case, the minor is treated as subscriber. In case of death of guardian the account of minor remains operative and a new account need not be opened. The surviving natural guardian or a guardian appointed by a competent court may continue the account of minor after producing the necessary guardianship certificate. . The PPF loan.
18. Are PF and PPF, two different schemes?
Yes, PF or EPF (Employee Provident Fund) is a compulsory deduction from your basic salary. The maximum deduction under PF or EPF is 12% of your basic salary. PPF or Public Provident Fund is a voluntary investment option. To open PPF account, you need to approach a bank or nearest post office. The minimum investment is Rs.500 and upto Rs.1.5 Lakhs in a financial year.
19. What is pension from the PF/EPF?
A part of EPF contribution goes towards EPS (Employee Pension Scheme). This EPS contribution is paid as pension post retirement. There are certain conditions like , one needs to be in continuous service for at least 10 years to be eligible to get pension. Do check with your organization to know more.
20. Will VPF earn similar interest as EPF?
Yes. EPF and VPF have same interest rate. Currently, for the Financial year 2021 – 22, the interest is at 8.5% per annum.
21. Can I have more than one PPF account under my name?
Only one PPF account can be opened by an individual. For minor accounts, PPF account can be opened as guardian.
22. Under PPF, what is the maximum number of times one can invest in a year?
Account holder can deposit a maximum 12 times in a year.
23. How can one check their PPF account balance?
One can visit the local branch or post office. If PPF account is opened through a bank. By linking the savings account to the PPF account, once can check their balance.
24. PPF has a lock-in of 15 years, so if for some reason one needs to do exit then is there a minimum lock-in period after which one could exit and what are the considerations to keep in mind while exiting in such cases?
Premature closure of PPF account is possible after completion of full 5 financial years, i.e during 7th year of opening or later. Premature closure of PPF account is allowed only in certain situations like for treatment of life-threatening disease of account holder/ spouse/ parents/ dependent children or for higher education of account holder or dependent children.
25. I have a PPF account. If I move to new tax regime, will the amount paid at maturity be liable to tax?
Yes, under new tax regime amount received on maturity at PPF would be taxable.
Employee Provident Fund/ Voluntary Provident Fund
1. Who can contribute to Voluntary Provident Fund?
Only salaried people who are enrolled under EPF can opt for VPF. Self-employed, businessmen or salaried but not covered under EPF cannot contribute under Voluntary Provident Fund.
2. Can I stop my VPF contributions anytime during the year?
You cannot discontinue or withdraw out of a VPF scheme in the middle of the year. It can be done only at the beginning of a financial year.
3. What is the maximum amount that one can contribute as VPF?
You can contribute 100% of basic plus dearness allowance as investment in VPF.
4. Is the interest earned on VPF taxable?
if you withdraw money within the first 5 years of service, then the interest becomes taxable.
5. Can one partially withdraw from VPF?
VPF offers partial withdrawal after a lock-in period of 5 years. If you withdraw from VPF before 5 years, the maturity amount becomes taxable.
6. What happens to my EPF account if I move out of the country?
You can withdraw from EPF account immediately if you are relocating to another country by filling out the EPF withdrawal form or by applying for the same online trough UAN’s portal.
If you do not withdraw your EPF, the account would still continue to earn interest even though there are no contributions. However the interest earned is not tax free in the period where there have been no contributions into the EPF account.
7. I have worked in company X for 6 years and then moved to Company Y. I transferred my EPF balance from employer X to Y account. I resigned from company Y before completing 5 years of service. If I withdraw my EPF amount now, would the entire EPF corpus amount be taxable?
Your PF balance on the day of cessation of employment payable to you is exempt from tax if you have rendered continuous service for a period of 5 years or more. If there are more than one employer and you have transferred EPF balance to another employer, then the total period of employment with all the employers is required to be considered for continuous 5 years of service or more.
Hence the EPF amount withdrawn in this case will be exempt from tax.
8. I worked at Company A for few years and then moved to Company B without any gap in employment. I forgot to transfer or withdraw from my previous EPF account. Now I have two EPF accounts. Should I consolidate both of them into one and how?
Yes, you need to surrender the old EPF account and transfer or merge it into the EPF account to the new employer.
With Universal Account number, it has become easy to merge multiple PF accounts. The UAN can be found on your salary slip. If not, you may seek help from your employer. The two accounts can be merged online on the EPFO website provided your KYC and Aadhar details are updated and registered with the EPFO.
As there was no gap in employment, the number of years of service will include the number of years with your previous employer as well. So if you withdraw from EPF after completing 5 consecutiive years of service, EPF corpus would be tax free. Hence it is important to consolidate your EPF accounts.
9. I was employed in India for more than 5 years, then I relocated abroad and now I am an NRI. Can I withdraw my EPF balance and give my NRO account details for transfer of my EPF corpus? Would there be any TDS as the funds are being transferred to NRO account?
As you have completed more than 5 years of service in India, you can withdraw your EPF corpus without any tax implications. There are no restrictions on transfer of EPF corpus to NRO account and there would be no TDS deducted.
10. Under what circumstances can I withdraw from EPF?
You can withdraw EPF balance after being out of employment for 60 days or after leaving a job, even if you have not attained the age of 58 years.
11. For how long will EPF account keep earning interest without any fresh contribution to it?
You will continue to earn interest on your account balance till the age of 58 even if there is no fresh contribution to your EPF account.
12. For how long will the interest earned on EPF corpus be tax free?
Accumulated balance up to the date of retirement or end of employment is not taxed, any interest earned on the PF account post resigning, retirement, or end of employment is taxable.
13. Is the EPF corpus taxable, if it is withdrawn after 2 or 3 years from retiring?
Interest earned before retirement will not get taxed irrespective of when it is withdrawn after retirement, but any interest earned post retirement will be taxable in the hands of the account holder.
14. Is it fine if I do not make any further contributions to my EPF account but still not withdraw my EPF account?
Yes, even if you do not make future contributions, your EPF account will continue to earn interest till you are 58 years of age.
15. Can I discontinue my Voluntary Provident Fund anytime?
Usually in the middle of the year you would not be allowed to discontinue. Please check with your organisation to know more on the VPF starting and discontinuation process.
16. What is the minimum lock in for VPF?
Withdrawals from VPF would be possible after 5 years of continuous contribution.
17. Is VPF added to EPF?
VPF is the extension of EPF. The interest offered on VPF is as per with the EPF scheme and the interest earned is credited to their EPF account. No separate VPF account is maintained.
18. Is VPF linked to UAN?
Yes, It is linked to existing EPF account.
19. Can I change VPF contribution every year?
Yes, one needs to inform their organization.
20. Are Employees Provident Fund (EPF) and the Voluntary Provident Fund (VPF) different?
VPF is an extension of EPF. In case of EPF, it is mandatory for employees to contribute 12% of their basic plus DA. In case of VPS, the contribution can vary and maximum is upto 100% of basic plus DA.
21. Is EPF/PF contribution above 2.5 Lakhs in a financial year taxable?
Yes, effective 1st April 2021, the interest earned on an employee’s contribution above Rs 2.5 lakh in a financial year will become taxable in the hands of the employee. Please note that the rule is only for employee contribution and employer contribution is not accounted.
22. Are PF withdrawals tax free? Can the whole amount be withdrawn? Is the entire amount guaranteed by the Govt Of India?
Yes
23. Is it good idea to take some amount from PF to close some of the home loans or personal loans?
No, try not to withdraw from EPF for other goals and keep the EPF amount for retirement.
National Pension Scheme
1) Who can join NPS?
Any Indian citizen between 18 and 60 years can join NPS. The only condition is that the person must comply with know your customer (KYC) norms.
2) Can a Non Resident Indian (NRI) join NPS?
Yes, an NRI can join NPS. However, the account will be closed if there is a change in the citizenship status of the NRI.
3) What are the documents needed for opening an NPS account?
You should fill the subscriber registration form and submit it along with proof of identity, address, and date of birth to the POP.
4) What is a Permanent Retirement Account Number (PRAN)?
Every NPS subscriber is issued a card with 12-digit unique number called Permanent Retirement Account Number or PRAN.
5) What are Tier-I and Tier-II accounts?
NPS offers two accounts: Tier-I and Tier-II accounts. Tier-I is a mandatory account and Tier-II is voluntary. The big difference between the two is on withdrawal of money invested in them. You cannot withdraw the entire money from Tier-I account till your retirement. Even on retirement, there are restrictions on withdrawal on the Tier-I account. The subscriber is free to withdraw the entire money from the Tier-II account.
6) Can I have more than one NPS account?
No, you cannot open multiple NPS accounts. In fact, there is no need to open a second account as NPS is portable across sectors and locations.
7) What is the minimum contribution in NPS?
You have to contribute a minimum of Rs.1000/- in your Tier-I account in a financial year.
The minimum amount to be contributed in a financial year in Tier-II account is Rs.250/-.
8) What will happen if I don’t make the minimum contribution?
If you do not contribute the minimum amount, your account will be frozen. You can unfreeze the account by visiting the POP and pay the minimum required amount and a penalty of Rs 100.
9) Will the government also contribute to my NPS account?
No, the government will not contribute to your NPS account.
10) What are the investment choices available in NPS?
The NPS offers two choices:
1) Active Choice: This option allows the investor to decide how the money should be invested in different assets.
2) Auto choice or lifecycle fund: This is the default option which invests money automatically in line with the age of the subscriber.
11) What are the investment options available under Active Choice?
The Active Choice offers three funds or investment options: Asset Class E (invests 50 per cent in stocks); Asset Class C (invests in fixed income instruments other than government securities); Asset Class G (invests only in government securities). An investor can choose one of these funds or opt for a combination of them.
12) Can I change my investment choices?
Yes, you can change your investment choices once in a financial year for both Tier-I and Tier-II accounts.
13) Can I change my scheme and pension fund managers?
Yes, you can change your scheme preference and pension fund manager. You can even change your investment option (active and auto choices).
14) What is the default fund manager and scheme in NPS?
SBI Pension Funds act as the default pension fund manager. Auto balanced scheme is the default scheme in NPS if you have not selected the scheme.
15) Can I have different pension fund managers and investment option for Tier I and Tier II account?
Yes, you can select different pension fund managers and investment options for your NPS Tier I and Tier II accounts.
16) Can I appoint nominees for Tier I and Tier II accounts?
Yes, you need to appoint a nominee at the time of opening the NPS account in the prescribed section of the account opening form. You can appoint up to 3 nominees for NPS Tier I and NPS Tier II account. You need to specify the percentage of your savings that you wish to allocate to each nominee. The share percentage across all nominees should collectively total up to 100%.
17) If I did not nominate at the time of opening NPS account, can I do so later. If so, how?
Yes, you can also add nominee later to your NPS account. You can do so after the allotment of PRAN by visiting the Point Of Presence (POP) and placing a service request to update nomination details.
18) Are there any charges for making a nomination?
There are no charges levied if you are making the nomination at the time of purchase or registration of PRAN. However, if you are adding the nominee later, it would be considered as a service request and you would be charged for the same at the rate of Rs 20/- plus applicable service tax for each request.
19) When can I withdraw money from NPS?
At the age of 60. You can withdraw a maximum of 60%.
You must use 40% of the corpus to buy an annuity income from a PFRDA-listed insurance company.
20) What are the conditions under which one can withdraw from NPS?
You can withdraw from NPS under the following conditions:
a) On superannuation:
When subscriber reaches the age of 60, they can withdraw 60% of the accumulated corpus as lumpsum. The remaining 40% of the accumulated corpus needs to be compulsarily used to purchase an annuity that would provide a regular monthly pension.
However, if total accumulated corpus is less than or equal to Rs 2 lakhs, subscriber can opt for 100% withdrawal.
b) Pre-mature exit:
After completion of 10 years, one can withdraw from NPS prematurely. In this case, minimum 80% of accumulated corpus needs to be invested into an annuity for providing regular monthly pension. The remaining 20% can be withdrawn as lumpsum.
c) On death of subscriber:
The entire accumulated corpus would be paid out to the nominee/legal heir in case of death of the subscriber.
21) If I open an NPS account and after a few years if I become an NRI, what hapens to my NPS account?
You can convert your resident NPS account into an NRI NPS account by submitting the duly filling Subscription Registration form for NRI along with a request letter and necessary documents to your associated PoP.
22) Can I defer withdrawing the lumpsum amount at 60?
Yes, you can defer withdrawing the lumpsum amount in NPS until you are 70 years old.
23) What if I want to take the money out before I am 60?
If you are getting out of the scheme before you are 60 years old, you can only withdraw 20% per cent of the accumulated corpus in NPS. You must use 80% per cent of the corpus to buy an annuity.
24) What happens to the money if I discontinue the scheme?
If you discontinue your investment, your account will be frozen. You can reactivate the account only if you make the minimum contribution required along with the penalty.
25) What happens if the subscriber dies before 60 years?
If the subscriber dies before 60 years, the entire accumulated corpus would be paid to the nominee/legal heir of the subscriber.
26) Who are the Annuity Service Providers under NPS ?
Indian Life Insurance companies which are licensed by Insurance Regulatory and Development Authority (IRDA) are empanelled by PFRDA to act as Annuity Service Provider’s to provide annuity services to the subscribers of NPS.
Currently, the following are the ASP’s empanelled by PFRDA.
1. Life Insurance Corporation Of India
2. SBI Life Insurance Co. Ltd
3. ICICI Prudential Life Insurance Co. Ltd
4. Bajaj Allianz Life Insurance Co. Ltd
5. Star Union Dai-ichi Life Insurance Co. Ltd
6. Reliance Life Insurance Co. Ltd
7. HDFC Life Insurance Co. Ltd
Note: The ASP empanellment process is an ongoing process and the list of ASP’s may grow in future.
27) Can I use more than 40% of my accumulated corpus to purchase the annuity at the time of exit from NPS upon attaining the age of 60 years?
Yes, a subscriber at the time of attaining the age of 60 years can purchase annuity up to 100% of accumulated pension wealth.
28) Can a NPS subscriber defer his annuity purchase under NPS at the time of exit at 60 years?
Yes, one can defer the mandatory purchase of annuity for a maximum period of 3 years, at the time of exit from NPS.
29) What is the default annuity scheme and default annuity service provider under NPS?
Default Annuity Service Provider – Life Insurance Corporation Of India (LIC).
Default Annuity Scheme – Annuity for life with a provision of 100% of the annuity payable to the spouse during his/ her life on death of annuitant’ and under this option, payment of monthly annuity would cease once the annuitant and the spouse die or after death of the annuitant if the spouse pre-deceases the annuitant, without any return of purchase price.
30) I had a corporate NPS account but my new company does not offer NPS – What should I do?
Convert your existing corporate NPS account into an individual NPS account.
31) What are the tax benefits of investments towards Tier II NPS account?
There are no tax benefits for investment towards Tier II NPS account.
32) I am investing in NPS voluntarily in NPS every year. Can I claim this amount under Sec 80CCD (1B) for tax relief? I have exhausted benefits of Rs 1.5 lakhs under Sec 80C.
Any individual who is a subscriber of NPS can claim tax deduction up to 10% of gross income under Sec 80 CCD (1) within the overall ceiling of Rs 1.5 lakhs under Sec 80CCE. This is over and above the Rs 1.5 lakhs deduction under Sec 80C.
33) How is the annuity income taxed?
The annuity income will be added to your income and taxed as per the income tax slab applicable to you.
34) What happens to my NPS account if I leave my company?
The company will no longer make contributions towards your NPS account and the same would be frozen. You can convert the existing corporate NPS account into an individual account by submitting the requisite forms.
35) How many times can I partially withdraw from NPS?
During the entire tenure of subscription under NPS, subscribers can make partial withdrawals upto maximum of three times.
36) What is the maximum amount one can withdraw from NPS?
As on the date of application for withdrawal, a subscriber is allowed a partial withdrawal of maximum of 25% of contributions made by him.
37. Does NPS also has a fund manager?
Yes, there are fund managers for NPS as well.
38. Is NPS available for OCI card holders?
Yes, OCI card holders can also now invest in NPS.
39. What is the difference between corporate NPS and individual NPS? which one is recommended?
In corporate NPS, the employer too contributes towards your NPS account. Also, additional tax benefits under Sec 80CCD (2) of up to 10% of salary (Basic + DA) would be available under corporate NPS. If employer is providing corporate NPS, it is better to opt for the same.
40. Would you recommend APY over NPS?
In Atal Pension Yojana, the maximum pension amount one could get is Rs 5,000/-. Hence NPS would be recommended over Atal Pension Yojana.
41. Is there any fixed cap in corporate NPS?
No
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