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Apart from the Employees’ Provident Fund and National Pension System, some companies contribute on behalf of their employees towards superannuation funds. These are group retirement savings schemes offered by insurers such as Life Insurance Corporation of India (LIC). The contributions can be made both by the employer and the employees.

These are generally of two types—defined benefit sch-emes and defined contribution schemes. Most companies now opt for defined contribution schemes. The employee can claim tax benefit on contributions up to 1.5 lakh under Section 80C. Employers can contribute up to 15% of the basic and dearness allowance of the employee. The employee can opt to contribute a similar amount. Just like any other retirement scheme, interest is accrued on the contributions made and it is tax-free.

In case you have changed jobs, you generally have three options with regard to investments in the superannuation fund: One, you can withdraw the money from the scheme. Two, you can transfer the fund.

“An employee can transfer the amount to the new company provided the new company has an approved superannuation fund," said Prashant Singh, vice president and business head - compliance and payroll outsourcing, TeamLease Services, a staffing firm.

Three, you can leave the money with the fund and withdraw the permissible one-third at the age of 58 while the rest has to be put into annuity, which provides pension. But leaving the fund as is can create a problem in managing and keeping track of things.

The amount withdrawn at the time of retirement is tax-free, while the annuity income will be taxed in accordance with the slab of the investor.

In case the employee opts for withdrawal at the time of a change in job, the entire money will be taxed according to the slab of the employee. Therefore, experts generally advise people to not withdraw money during a change of job as it will be fully taxable according to the slab rate of the individual.

“We don’t advise our clients to withdraw money from superannuation funds due to higher tax incidence. It is better to transfer the money to the new employer if the new employer gives the option to invest in a superannuation fund. If transfer is not possible, or the new employer is not offering superannuation, the employee can continue keeping the amount in superannuation fund and withdraw one-third at the time of retirement and invest the rest in annuity," said Renu Maheshwari, chief executive officer and principal adviser at Finzscholarz Wealth Managers LLP, a Sebi registered investment adviser.

“A few fund houses offer choice of asset allocation. Go for maximum equity to take advantage of growth assets in the long term. The allocation can be changed to make it debt heavy, closer to retirement. If the employee is young, it would be better to go for higher equity allocation," said Maheshwari.

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