National Pension System (NPS) is a government-sponsored pension scheme that was launched in the year 2004 by Pension Fund Regulatory and Development Authority of India (PFRDA) for Government employees only but was later made available to all the employees from Public sector, Private sector and even the unorganised sector w.e.f. 1st May 2009.

The objective of this scheme was to secure financial future of the individual after the retirement. Under NPS, the individual contributes to his / her retirement account and his/her employer (if applicable) can also co-contribute for the welfare of the individual.

individual should opt for NPS for the following reasons:

1. Confirmed annuity in their retirement life.
2. Reduce post retirement dependency on others for livelihood
3. Good returns in long term on their investment.
4. Simple &hassle free process of enrollment.
5. Entry age 18 to 70 years.
6. Voluntary contribution
7. Portable Investment.
8. Various investment options available to cater to all risk appetites (i) Equity (ii) Govt Bonds (iii) Corporate Bonds (iv) Alternate Investment option.
9. Tax benefits U/S 80 CCD – up to Rs. 50,000/-.
10. Very low cost investment scheme.
11. Partial withdrawal up to 25% after 3 years.
12. Minimum Contribution 1000/- per year.

Yes. Investment in NPS is independent of one’s contributions or subscription to any Provident/Pension Fund.

An individual citizen can open an NPS account through CSC e Governance Services India Limited registered by PFRDA.

The Government will not be making any contribution to NPS account.

No. Multiple NPS accounts for a single individual is not allowed and there is no necessity, as NPS is fully portable across sectors and locations.

NPS offers two categories of accounts as of now:

Tier 1: Meant for retirement savings: NPS Tier I account is a mandatory account and is meant to save up for retirement. When you open an NPS Tier I account, you get a Permanent Retirement Account Number (PRAN). You have to make a minimum contribution of Rs. 500 while opening a Tier I account.

The minimum contribution to be made in Tier I account per annum is Rs. 1,000. However, note that there is no ceiling on the maximum contribution. The NPS Tier 1 account matures at the age of 60 and you can extend it till the age of 75. It is eligible for tax deduction on contributions up to Rs 1.5 lakh under Section 80 C and an additional Rs 50,000 under Section 80 CCD (1B) of the Income Tax Act, 1961

Tier II: Meant for general investment: NPS Tier II account is a voluntary account which can be opened only when you have a Tier I account. It is an account with flexible withdrawal and exit rules. Though Tier II account works almost like Tier I account, there are certain differences.

To open an NPS Tier II account, you need to make a minimum contribution of Rs. 1000, and unlike Tier I account, contributions to Tier II account don’t qualify for any tax exemption, you can’t claim deductions and on exit, the corpus is taxed. Tier II account is more like a bank account that you can use to meet your needs in a holistic manner.

Yes. A subscriber has to contribute a minimum annual contribution of Rs.1000/- for his/her Tier I account in a financial year and if not contributed the account will be frozen. In order to reactivate the account, the customer has to pay the minimum contribution of Rs. 500/-. For unfreezing an account the subscriber has to approach the Point of Presence (PoP) and pay the required amount, or he/she can make contribution through online e-NPS platform.

The following table provides the complete information on the minimum contribution requirements:-

Through NPS sale VLE can earn good commission on first time registration and on every subsequent contribution made by the customer. Details below:

The subscriber needs to visit the nearest VLE center to enroll on the scheme. The following documents need to be submitted for opening of a NPS account:

• 1. Completely filled in subscriber registration form
• 2. Photograph
• 3. Proof of identity (Self attested copy need to be uploaded)
• 4. Proof of Address (Self attested copy need to be uploaded)
• 5. Date of birth proof
• 6. Cancelled cheque or bank passbook copy (Self attested copy need to be uploaded)
• 7. PAN or Form 60 (Self attested copy need to be uploaded)

VLE needs to upload all these documents to NPS portal.
Preferred Pension Fund needs to be selected. Currently the approved Funds are

• ICICI Prudential Pension Fund
• LIC Pension Fund Ltd
• Kotak Mahindra Pension Fund
• SBI Pension Fund
• UTI Retirement Solution Pension Fund
• HDFC Pension Management Company Ltd
• Birla Sunlife Pension Management Ltd
(Note: This list may undergo changes if new PF are registered or existing PF are de-registered by PFRDA).

NPS offers two approaches to invest subscriber’s contributions:
1. Active Choice: The funds will automatically be invested in funds as per percentage defined by PFRDA (Asset Equity Class, Asset Corporate Bond, Asset Class Govt Bond and Asset Alternate Class)
2. Auto Choice: Subscriber needs to choose between three lifestyle fund i.e.
i. Aggressive Life Cycle Fund– Chances of high returns and carries high (LC75)
ii. Moderate Life Cycle Fund– Medium returns and medium risk (LC50)
iii. Conservative Life Cycle Fund– Low return and low risk (LC25)
For more details, please visit www.pfrda.org.in

The subscriber can partially withdraw his investment from NPS after a minimum of 3 years after subscription. The withdrawal is limited to maximum of 25% of their contribution. Partial withdrawal from NPS is permitted up to a maximum of 3 times during the entire tenure and is available only in case of urgent need of funds requirement such as Marriage, Medical emergency, Purchase of house.

For subscribers joining between the age of 18-60 years

1. Upon attainment of 60 years of age: At least 40% of the accumulated pension wealth of the subscriber needs to be utilized for the purchase of an annuity providing for the monthly pension to the subscriber and the balance 60% is paid as a lump sum to the subscriber. The subscriber can choose to increase the annuity component if they so wish. If the total corpus does not exceed Rs. 5 lakhs then subscriber has the option to withdraw the total corpus in lump-sum.

2. Exit NPS before attainment of 60 years of age: At least 80% of accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension to the subscriber and the balance 20% is paid as a lump-sum to the subscriber. If the total corpus does not exceed Rs. 2.5 lakhs then the subscriber has the option to withdraw the entire corpus in lump-sum. Subscriber can exit from NPS only after completion of minimum 10 years in NPS.

3. Upon Death (Irrespective of Cause): The entire accumulated pension wealth would be paid to the nominee/legal heir of the subscriber and there would not be any purchase of annuity/pension. However, the nominee(s), if they so wish can choose to purchase annuity.

For subscribers joining between 60-70 years

1. Normal Exit: After completion of 3years form the date of joining NPS, the subscriber will be required to annuitize at least 40% of the corpus for purchases of annuity for receiving the monthly pension and the remaining corpus of 60% can be withdrawn in lump-sum. In case the accumulated corpus at the time of exit is less than or equal to Rs. 5 lakhs, the subscriber will have the option to withdraw the entire corpus in lump-sum.

2. Premature Exit: Any exit before completion of 3 years will be treated as premature exit. The subscriber will required to annuitize at least 80% of the corpus for purchases of annuity for receiving the monthly pension and the remaining corpus of 20% can be withdraw in lump-sum. In case the accumulated corpus at the time of exit is less than or equal to Rs.2.5 lakhs, the subscriber will have the option to withdraw the entire corpus in lump-sum.

3. Upon Death (Irrespective of Cause): The entire accumulated pension wealth would be paid to the nominee/legal heir of the subscriber and there would not be any purchase of annuity/pension. However the nominee(s), if they so wish, have the option to purchase annuity.

On maturity, the subscriber has a choice to opt for the pension of entire corpus or they can opt for a partial amount as pension and the rest can be taken as a lump sum amount.
For pension customer has to choose the Life Insurance company from list of empanelled companies. All Indian Life Insurance companies who are licensed by Insurance Regulatory and Development Authority (IRDA) are empanelled by PFRDA to act as Annuity Service Providers to provide annuity services to the subscribers on exit/maturity from NPS.

Permanent Retirement Account Number (PRAN) is generated at the same time of registration, an email alert as well as SMS alert will be sent to the registered email ID and mobile number of the subscriber. In case KYC or bank details rejected by POP or CRA for any reason, PoP shall intimate the subscriber of the same to registered email id along with the reasons for rejection of application.

The following are the portability features associated with NPS:-
1. NPS account can be operated from anywhere in the country irrespective of individual employment and location/geography.
2. Subscribers can shift from one sector to another sector like Private to Government or vice versa or All Citizen Model to Corporate Model and vice versa. Hence a citizen (individual) can move to Central Government, State Government etc with the same Pension Account. Also subscriber can shift within sector like from one PoP to another PoP and from one PoP-SP to another PoP- SP. Likewise an employee who leaves the employment to become a self- employed can continue with his/her individual contributions. If he/she enters re-employment he/she may continue to contribute and his/her employer may also contribute and so on.
3. The subscriber can contribute to NPS online or from any of the PoP/PoP-SP despite not being registered through them and from anywhere in India.

Yes. Subscriber can select different Pension Funds and Investment Options for his/her NPS Tier I and Tier II accounts.

Yes, subscriber needs to appoint a nominee at the time of opening of a NPS account in the prescribed section of the account opening form. He/She can appoint upto 3 nominees for NPS Tier I account. In such a case, the percentage of their saving that they wish to allocate to each nominee should be specified and the share percentage across all nominees should collectively aggregate to 100%.

If subscriber has not made the nomination at the time of NPS registration, they can do the same after the allotment of PRAN. He/she will have to visit their PoP and place Service Request to the PoP for updation of nominations details.

Yes. Subscriber can change the nominees in their NPS account at any time after they have received their PRAN.

If subscriber is making the nomination at the time of registering for PRAN, no charges are levied. However, a subsequent request for nomination updation would be considered as a service request and will be charged an amount of Rs. 30/- plus applicable service tax for each request. CSC is not charging any non monetary charges as of now.

The tax benefits that are available on contributions to NPS are:-

1. Self-employed person (Any individual other than a salaried employee): Contributions in NPS, upto 20% of the Gross Income of the self-employed is allowed as deduction from the taxable income under section 80CCD(1) of the Income Tax Act, subject to ceiling of Rs. 1.50 lacs under Section 80CCE.
2. Salaried Employee: Employees own contribution in NPS upto 10% of salary (Basic plus Dearness Allowance) is allowed as deduction from the taxable income under Section 80CCD(1) of Income Tax Act, subject to a ceiling of Rs.1.50 lacs under section 80CCE. Salaried Employee also gets the tax benefit on employer contribution to his/her NPS account. Contribution made by the employer upto 10% of salary (Basic plus Dearness Allowance) can be claimed as deduction from the taxable income under section 80CCD(2) of the Income Tax Act,1961. There is no upper cap (in terms of amount) on this tax deduction. This deduction is over and above the ceiling limit of Rs 1.5 lacs provided under Section 80C and limit of Rs 50,000 under Section 80CCD(1B).
3. Employer Contribution: Contributions made by the employer towards an employee’s pension fund is eligible for deductions under Section 80CCD(2). The deduction is limited to 10% of the employee’s basic salary plus dearness allowance (DA), subject to the overall ceiling of Rs. 7.5 lakhs.

Additional Tax benefit on self contribution to NPS: For both salaried and self-employed individuals, an additional deduction for investment up to Rs.50,000/- has been provided under section 80CCD(1B) of the Income Tax Act, 1961 which is over and above the ceiling of Rs.1,50,000/-. Therefore, the total deduction that can be claimed for own contribution to NPS can go upto Rs.2 lakh.

• Partial Withdrawals from NPS are tax exempted.
• Amount utilized for purchase of annuity (minimum 40% mandatory) on maturity/exit is not treated as income.
• Goods and Service Tax is not applicable on annuity purchase by NPS subscriber.
• 60 % of the total corpus received as lumpsum by subscriber on exit/maturity is not treated as income.

The corporate adopting NPS for its employees benefit from the lower administration costs, fund management costs, compliances and administration in comparison with similar superannuation schemes being run by life insurers or self-managed superannuation scheme. The employers can treat the contributions up to 10% of basic plus dearness allowance made to each employee’s NPS account as business expenses and get deduction under section 36(1)(iv)(a) of the Income Tax Act, 1961 without any upper ceiling.