· Tax-free transfer from superannuation funds to NPS is permitted
· Process involves request submission to superannuation fund trust
· Tax exemption is applicable in both old and new tax regimes
Financial planning for retirement requires a long-term approach, consistent savings, and regular portfolio review. During the process, if one wants to transfer one’s provident fund to the National Pension Scheme (NPS), it is possible to do so. The Pension Fund Regulatory and Development Authority (PFRDA) allows transfer of funds from approved superannuation funds/provident funds to the NPS. Usually, formal sector workers are covered under the Employees’ Provident Fund Organisation (EPFO) or in exempted category provident funds. Still, if they prefer investing in NPS instead of EPF, they can not only open the NPS account but also get their superannuation fund transferred to the NPS. The transferred amount will not be considered an income, and thus, exempt from tax, under clause (v) of Section 10(13) of the Income-tax Act, 1961.
Clause (V) Of Section 10(13) Of The Income-Tax Act, 1961: As amended by the Finance Act, 2025, the sub clause (v) reads: “any payment from an approved superannuation fund made—
(v) by way of transfer to the account of the employee under a pension scheme referred to in section 80CCD and notified by the Central Government”
What Is An Approved Superannuation Fund?
The act defined superannuation funds as “a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part B of the Fourth Schedule.”
Now the question is whether the transfer is tax-exempt only in the current tax regime, or in the new tax regime, as well.
Is The Transferred Amount Taxable?
Says Rajesh Khandagale, SVP - NPS, KFin Technologies: “The tax-free transfer of Superannuation funds to NPS is available in both Old Tax as well as in the New tax Regime.” But he cautions that “The exemption applies only when the transfer is made directly from Superannuation funds to NPS and not via withdrawal by the employee.”
So, it means that the request needs to be made to the provident fund authorities to transfer the funds to the NPS. Further, a provident fund/superannuation fund can be transferred to the NPS both during one’s working years and after retirement.
Khandagale suggests transferring the funds when one wants to gain more flexibility in investment options, fund managers, enjoy tax benefits under the NPS system, or consolidate the retirement corpus.
How To Transfer Superannuation Funds To The NPS?
To transfer funds to NPS, one must first have an active NPS Tier I account. One can open the account either offline (by submitting the NPS form to your employer or point of presence—PoP) or online (using eNPS portal or intermediary websites, such as those run by banks).
Once the account is opened and is active, the employee needs to send a fund transfer request to the superannuation fund trust via their current employer.
After receiving the request, the Superannuation Fund Trust initiates the transfer of funds, per the provisions of the Trust Deed and the Income-tax Act, 1961.
The Superannuation fund issues a cheque or a demand draft (DD).
The payment is issued in the name of Nodal Office (Pay and Accounts Office—PAO or Cheque Drawing and Disbursing Officer—CDDO) – subscriber name – 12-digit PRAN (permanent retirement account number), in case of government employees
For private sector employees, the payment is issued in the name of the PoP collection account – subscriber name – 12-digit PRAN
The transfer process takes around three working days to complete.
Khandagale explains the process, saying, “Subscriber consent is a must for transferring their Superannuation Pension Fund to the NPS. The accumulated corpus from your Superannuation Pension Fund will be transferred to your NPS account after completing all necessary formalities. NPS contributions typically reflect in your account within 3 working days, depending on fund realisation and processing time by Subscriber POP. The process involves the contribution being processed by Subscriber Point of Presence (PoP), sent to the Trustee Bank, then invested by the Pension Fund (PF), and finally, units are allocated to your account.”
So, once you decide to transfer the funds from an interest-based provident/superannuation fund to market-based NPS, it can be done within three days after the superannuation fund receives the request. The transfer is not treated as income and remains tax-exempt.
