With loans now available even over a phone call, falling into debt is easy. But debt does not always mean losing every asset you own. Indian law protects certain savings and investments—such as EPF, PPF, NPS, and gratuity—to ensure long-term financial security for individuals and their families, even during times of financial distress.
Here’s a list of instruments that cannot be attached by the court
Employees’ Provident Fund (EPF) and Gratuity: Under Section 10(1) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the balance in an account cannot be attached by a court, nor can it be assigned or charged. At the same time, under the Payment of Gratuity Act and Section 60 of the Code of Civil Procedure, gratuity is legally shielded from attachmen
Public Provident Fund (PPF): , an excellent investment that can give an investor around 7.5% post-tax return and deductable under section 80C, cannot be the court cannot attach the fund for payment to the creditor, as per the PPF act of 1968. However, it can be seized by income tax authorities, in case of default or fraudulent activities.
National Pension Scheme (NPS): Under the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2015, savings held in an Tier I account are protected from court attachment, i.e. this money cannot be seized to recover dues in case the subscriber defaults.
Life insurance under the Married Women’s Property (MWP): The MWP Act, 1874, has a legal provision under Section 6 that protects a policy for the wife and children. If a policy is bought under this Act, the insurance payout goes directly to the family and cannot be claimed by creditors, even if the policyholder has substantial debts.
Assets under irrevocable trust: Assets in a valid irrevocable trust are no longer considered the individual’s personal property, hence, the creditors cannot claim them—unless it is proven that the trust was set up with the intention of defrauding creditors.
What is the legality behind it?
These are mandatory and small savings schemes and are meant for long-term family protection, and hence creditors cannot easily claim these funds, especially when nominees or surviving family members are clearly mentioned, explains Abhishek Kumar, SEBI RIA, Founder- SahajMoney
“For instance, if a bank gives a home loan, the house itself acts as collateral. In case of default, the bank can recover its dues by selling the property, but it cannot demand the remaining shortfall from protected savings like EPF or PPF, as these are kept outside the reach of creditors to secure the family’s future.”
Also it should be noted that, for the schemes like EPF and PPF, there is a capping of ₹1.5 lakh which is protected by law.
“The legal intent behind protecting funds like EPF and PPF is to safeguard families, not to help individuals defraud creditors,” he concludes