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FREQUENTLY ASKED QUESTIONS

  • 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.

  • An 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 your 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 70. 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:-

    For All citizens model Tier I Tier II
    Minimum Contribution at the time of account opening Rs. 500 Rs. 1000
    Minimum amount per contribution Rs. 500 Rs. 250
    Minimum total contribution in the year Rs. 1000 -
    Minimum frequency of contributions 1 per year -
  • The benefits of NPS are
    • It is voluntary - A Subscriber can contribute at any point of time in a Financial Year and also change the amount he wants to set aside and save every year.
    • It is simple - Subscriber is required to open an account with any one of the POPs (Point of Presence) or through eNPS (https://enps.nsdl.com/eNPS/).
    • It is flexible - Subscribers can choose their own investment options and pension fund and see their money grow.
    • It is portable - Subscribers can operate their account from anywhere, even if they change the city and/or employment.
    • It is regulated - NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust.

  • Pension Funds are responsible for investing contributions, accumulating them and managing pension corpus through various schemes under National Pension System in accordance with the provisions of the PFRDA Act.

  • 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.
      • Aggressive Life Cycle Fund – Chances of high returns and carries high (LC75)
      • Moderate Life Cycle Fund – Medium returns and medium risk (LC50)
      • Conservative Life Cycle Fund – Low return and low risk (LC25)

  • Tax Benefit available to Individual:

    Any individual who is Subscriber of NPS can claim tax benefit under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.

    Exclusive Tax Benefit to all NPS Subscribers u/s 80CCD (1B)

    An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act. 1961.

    Tax Benefits under the Corporate Sector:

    • Corporate Subscriber:

      Additional Tax Benefit is available to Subscribers under Corporate Sector, u/s 80CCD (2) of Income Tax Act. Employer's NPS contribution (for the benefit of employee) up to 10% of salary (Basic + DA), is deductible from taxable income, up-to 7.5 Lakh.

    • Corporates

      Employer’s Contribution towards NPS up to 10% of salary (Basic + DA) can be deducted as ‘Business Expense’ from their Profit & Loss Account.

  • 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:

    NPS Account can be opened through Online Aadhaar or Document Upload process. Applicant to provide personal details, nomination details, bank details, pension fund scheme details and fatca declaration for registering under NPS. VLE needs to do ‘Original and seen Verified’ stamp and sign the documents.

  • You can approach the VLE to activate your Tier II Account. Subscriber is required to fill the relevant form and submit.

  • A Subscriber is required to make initial contribution (minimum of Rs. 500 for Tier I and a minimum of Rs. 1000 for Tier II) at the time of registration. Subsequently, a Subscriber can make contribution subject to the following conditions:

    Tier I:

    • Minimum amount per contribution - Rs. 500
    • Minimum contribution per Financial Year - Rs. 1,000
    • Minimum number of contributions in a Financial Year – one

    Over and above the mandated limit of a minimum of one contribution in Tier I, a Subscriber may decide on the frequency of the contributions across the year as per his / her convenience.

    Tier II:

    • Minimum amount per contribution - Rs. 250
    • No minimum balance required

  • Units will be credited to the subscriber’s account on the day contribution is invested by the PFM (Pension Fund Manager). It takes T+2 days to get unit credited in subscriber account, wherein T being the date of fund receipt at CSC.

  • Yes. To contribute in NPS, only Permanent Retirement Account Number is required. Once PRAN is allotted to a Subscriber, contribution can be made irrespective of whether PRAN card is received or not.

  • A Subscriber can request for change / correction in personal details, nomination details, bank details, reissue of I-PIN/T-PIN/PRAN Card to the CSC. A Subscriber can also update his / her photograph and signature by submitting written request to the CSC

  • Subscriber is allowed to register up to three nominees in NPS. Yes, minor can be a nominee. In such case, Subscriber will be required to provide guardian's details and date of birth of the minor.

  • YIn case of loss or damage of PRAN card, the Subscriber needs to submit a duly filled S2 form to the CSC. After verifying the form, the CSC will enter and authorize the request in the CRA system. Subsequently, the request is processed by CRA and a fresh PRAN Card is printed and sent to Subscriber's registered address.

  • The Annual NPS Account Statement (as of March 31st of every year) is sent to the registered address of Subscriber. However, access to your Transaction statement is not only limited to this. A Subscriber can also get the transaction statement:

    1. By accessing NPS account through PRAN and password
    2. Subscribers can also view Statement of Holding through account Log-in
    3. Subscriber can request transaction statement on e-mail ID through IVR (CRA toll free number)
    4. Subscriber can also request for Transaction Statement through NPS mobile App.

  • 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.

  • Withdrawal is allowed only against the specified reasons such as, A. Higher education of children B. Marriage of children C. For the purchase/construction of residential house. D. For treatment of specified illnesses for Subscriber, Spouse, children. E.

    To meet medical and incidental expenses arising out of the disability or incapacitation suffered by the Subscriber F. For Skill development/re-skilling or any other self-development activities G. For Establishment of own venture or any start-up (Only for ’All Citizens’ Sector Subscribers).

  • 1. For subscribers joining between the age of 18-60 years

    • 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.
    • 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 lakh then the subscriber has the option to withdraw the entire corpus in lump-sum.

      Subscriber can exit from NPS only after completion of minimum 5 years in NPS.

    • 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.

    2. For subscribers joining between 60-65 years

    • 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.
    • 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 Lakh, the subscriber will have the option to withdraw the entire corpus in lump-sum.
    • 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 (subject to terms & conditions mentioned above).

    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.

  • The Withdrawal proceeds are credited in Subscriber’s Bank Account (as per the bank details provided at the time of initiating online Exit request) through electronic mode only.

  • No, upon exit from Tier-1 account, Tier-2 account gets closed automatically. The Subscriber is required to initiate online Tier-2 withdrawal request alongwith Tier-1 Account.

  • Lump sum Withdrawal - In case of exit upon attaining the age of superannuation, lump sum withdrawal i.e. 60% of the total accumulated pension wealth is tax exempted. Annuity - The amount utilized for purchase of annuity at exit upon attaining the age of superannuation is tax exempted. However, the annuity income (pension) received will be taxed in the year of receipt as per the applicable tax slab of the subscriber.

  • No, Tax benefits are not available in case of Tier -2 Withdrawal.

  • If exit request is initiated by Subscriber online in CRA System through digital signature (OTP Authentication/eSign) and complete scanned documents are uploaded, then physical Exit Form is not required to be submitted to the associated POP.

    POP can verify & authorize Exit request based on scanned documents using maker-checker User IDs.

    If Subscriber is not able to initiate online Exit request, the Subscriber is required to submit duly filled-up Exit Form along with supporting documents such as [KYC Documents (Identity & Address Proof), Bank Account Proof, Copy of PRAN/ePRAN and other required documents as provided in Exit Form] to the associated POP.

  • The Withdrawal proceeds are credited in Nominee/Claimant Bank Account (as per the bank details provided at the time of initiating online Withdrawal request) through electronic mode only.

  • The Nominee/Claimant is required to submit duly filled-up Death Exit Form alongwith supporting documents such as [Death Certificate of deceased Subscriber, KYC Documents (Identity & Address Proof), Bank Account Proof and other required documents of Nominee/Claimant]. The list of documents required is given in Death Exit Form.

  • In the context of NPS, Annuity refers to the monthly sum received by the Subscriber/Claimant) from the Annuity Service Provider (ASP). A percentage of the pension wealth as decided by the Subscribers/Claimants (minimum 40% or 80% is to be invested with ASP in case, Withdrawal is due to Superannuation & Pre-mature Exit) is utilized for purchase of Annuity from the empaneled Annuity Service Providers.

  • Indian Life Insurance companies which are licensed by Insurance Regulatory and Development Authority (IRDA) can act as Annuity Service Providers. However, Annuity Service Providers need to be empaneled by PFRDA to provide Annuity services to the NPS Subscribers.

  • Following are the most common variants of annuity schemes that are available to NPS Subscribers:

    • Annuity for Life with Return of Purchase Price - Subscriber will get annuity for life time and on death of the Subscriber, payment of annuity ceases & 100% of the purchase price will be returned to the nominee(s).
    • Annuity for Life without Return of Purchase Price - Subscriber will get annuity for life time and on death of the Subscriber, payment of annuity ceases and no further amount will be payable.
    • Joint Life Annuity with Return of Purchase Price - Subscriber will get annuity for life time and on death of the Subscriber, annuity will be payable to Spouse for life time. On death of the Spouse, payment of annuity ceases and 100% of the purchase price will be returned to the nominee(s).
    • Joint Life Annuity without Return of Purchase Price - Subscriber will get annuity for life time and on death of the Subscriber, annuity will be payable to Spouse for life time. On death of the Spouse, payment of annuity ceases and no further amount will be payable.
    • NPS - Family Income Option with Return of Purchase Price - Subscriber will get annuity for life time and on death of the Subscriber, annuity will be payable to spouse of the Subscriber (if any) for life time. On death of Spouse, to dependent mother and then to dependent father of the Subscriber. On death of the last annuitant, payment of annuity ceases and 100% of the purchase price will be returned to the surviving children of the Subscriber and in absence of children, the legal heirs of the subscriber, as applicable.

FAQs on Exit