If I resign today with Rs 24 lakh superannuation and Rs 9 lakh in gratuity, can I save tax by transferring these to NPS?

These are a set of queries raised by ET Wealth readers, which have been answered by our panel of experts.

I have been employed with a company for a long time, and have accumulated approximately Rs 24 lakh in superannuation and Rs 9 lakh in gratuity. If I resign and take up a new job, will the superannuation and gratuity be taxed on transfer/withdrawal? To avoid tax, can I transfer these to the NPS while exiting the company?

Amit Maheshwari Tax Partner, AKM Global: Under Section 10(13) of the Income Tax Act, 1961, any payment from an approved superannuation fund on retirement is tax-exempt. However, if you withdraw the superannuation amount of Rs 24 lakh before retirement, it will be added to your taxable income and taxed as per your slab rate. You can transfer the balance to your new employer’s approved superannuation fund or the National Pension System (NPS), both of which are tax-exempt transfers. For gratuity, Section 10(10) allows an exemption of up to the lowest of Rs 20 lakh or 15 days’ salary for each year of service. Any amount exceeding this is taxable as per your slab rate. While gratuity cannot be directly transferred to the NPS, you can withdraw it, claim exemption, and invest the balance in the NPS to get additional tax benefits under Section 80CCD(1B). Transferring your superannuation to the new employer’s fund or the NPS, rather than withdrawing it, would be more beneficial.

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I am 43, support a family of five, and invest across mutual funds, equities, the National Pension System (NPS), ULIPs, recurring deposits, and fixed deposits. From a long-term retirement perspective, is continuing to invest in NPS a wise decision?

Rushabh Desai, Founder, Rupee With Rushabh Investment Services: NPS is a useful product purely from a tax-efficiency perspective. Under the old tax regime, you can claim deductions of up to Rs 2 lakh per financial year—Rs 1.5 lakh under Sections 80C/80CCD(1) and an additional Rs 50,000 under Section 80CCD(1B). However, when compared with equity-oriented mutual funds, NPS has clear limitations in terms of flexibility and return potential.


You have 17 years until retirement, a sufficiently long horizon to take higher equity risk to generate superior risk-adjusted returns. For this, building a well-diversified equity mutual fund portfolio would be effective. You may continue investing in NPS solely for its tax benefits, but not as a core wealth-creation vehicle. Avoid ULIPs as they neither add meaningful investment value nor offer optimal insurance coverage. Insurance and investments should be kept separate to maximise the benefits of each. For equity mutual fund allocation, consider spreading investments evenly: 20% each in a flexi-cap fund, value fund, contra fund, mid-cap fund, and small-cap fund.

Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away. Email ID: etwealth@timesgroup.com