If you have failed to repay your loan then banks through an attachment order by the court can claim your assets such as your land, shares, mutual funds, etc. to compensate the loan amount. This attachment order is commonly known as freezing order.
If your assets are attached then you cannot use or sell it. However, the Parliament of India has placed various financial assets under special legal protection which cannot be attached by any Indian court. Given below is the explanation of these assets:
- Employee Provident Fund (EPF)
- Public Provident Fund (PPF)
- National Pension System (NPS)
- Insurance policy
1. Employee Provident Fund (EPF)
Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS) balances are protected under Section 10 of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. The EPF balance is accumulated through employer and employee contributions for employees working in the organized sector 12% of your basic salary and dearness allowance is deducted towards EPF. It is considered an important element of social security and, hence, is given special legal protection. Also, EPF provisions allow you to make withdrawals to tide over certain kind of emergencies
2. Public Provident Fund (PPF)
Public Provident Fund (PPF) is protected under Section 14A of the Government Savings Act, 1873. All Indian residents from the organized and unorganized sector are eligible to make a contribution in this. The annual contribution ranges from Rs 500 to Rs 1.5 lakh. According to a recent notification from the finance ministry, the interest rates on small savings schemes including PPF will continue to carry an annual interest rate of 8 per cent for the April-June quarter. Owing to its long term nature of the investment, it can be used for retirement.
Currently, PPF earns an interest of 8% and given its tax-friendly structure, it’s one of the highly recommended products for long-term debt allocation. Given its long-term nature, it can also be used for saving for retirement and, therefore, the legal protection it enjoys helps.
3. National Pension System (NPS)
Your NPS account (National Pension System) balance is protected under Section 6(a) of the Pension Fund Regulatory Authority of India (Exits and Withdrawals) Rules, 2015, except 25% of the accumulated balance. NPS, which is a retirement savings vehicle regulated by the Pension Fund Regulatory and Development Authority, is considered an important part of old-age security and, hence, is accorded immunity from attachment. For the first quarter of the financial year 2019-20 starting April 1, 2019, and ending on June 30, 2019, the interest rate on the NSC is 8%.
4. Insurance policy
A life insurance policy on your own life is protected from attachment under Section 60 of the Code of Civil Procedure, 1908. In addition, a life insurance policy taken under Section 6(1) of the Married Women’s Property Act, 1874, enjoys a second layer of protection. Such a policy has your wife or children as beneficiaries and is legally considered their property. Unless creditors can prove that such a policy was taken with the intent to defraud creditors, such a policy cannot be attached.
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