National Pension System (NPS) is a defined contribution pension. NPS is voluntary for subscription by an individual to make contributions to his/her Individual Pension Account during the working life for creating a pension corpus from which regular income will be generated after retirement / working age.
NPS is mandatory for the Central Government recruits w.e.f. 1st Jan 2004 (except armed forces) which replaced the earlier defined benefit pension and has been subsequently adopted by almost all State Governments for their employees.
NPS has a unique unbundled architecture wherein each intermediary (PoP, Pension Fund, Central Recordkeeping Agency, Trustee Bank, Annuity Service Provider, Retirement Advisors, Custodian, NPS Trust) is assigned a specialized activity by the Regulator. This ensures economies of scale and operational/intermediation costs at bare minimum to subscribers.
This unique structure safeguards subscribers’ interest as the role of a particular intermediary is limited to the functions assigned to it and no single intermediary/entity has complete control over NPS as a System.
NPS can be extended by an employer as a retirement benefit scheme to the employees and NPS Account having employer-employee relationship (non-government) are classified / categorized as Corporate Sector. An Employer can adopt NPS alongwith other retirement benefit schemes and contributions towards NPS in Corporate Sector can be either from employer/employee only or from both employer/employee in varied proportions.
NPS caters to the Central Government (CG) Sector, State Government (SG) Sector, Corporate Sector and All Citizen Sector.
For implementation of NPS for its employees, an employer has the following options:
Obtain registration from the Authority as a Point of Presence (PoP) under Regulation 3 of PFRDA (Points of Presence) Regulations, 2018 and thereafter undertake NPS related activities for their employees directly with NPS architecture (such as employee registration, contribution upload, facilitating withdrawals/exit, grievance resolution, change in personal data etc).
For eligibility to register as a PoP, please refer PFRDA (Points of Presence) Regulations, 2018.
Register with Central Recordkeeping Agency (CRA) as employer/corporate under NPS Corporate Sector Model by submitting an application - CHO through a registered Point of Presence (PoP) and avail NPS services (such as employee registration, contribution upload, facilitating withdrawals/exit, grievance resolution, change in personal data etc) through the PoP by paying the prescribed fees/charges to PoP. In this model, the employer can avail services of any of the PoPs registered with PFRDA which can subsequently be changed, if need arises.
The following entities are eligible to register as a corporate/employer under NPS Corporate Sector Model through a PoP:
NPS is mandatory for the Central Government recruits w.e.f. 1st Jan 2004 (except armed forces) which replaced the earlier defined benefit pension and almost all State Governments have adopted NPS for their employees and is applicable as per the terms and date notified by the State Government in their respective gazette notifications.
NPS can be introduced by an employer / corporate (entity) for its employees (as a retirement benefit scheme) within the purview of their employer-employee relationship on a voluntary or a mandatory basis. In case the employer adopts NPS as a mandatory retirement benefit scheme for its employees, then all employees should join NPS from the date of adoption by the employer. In case of NPS being implemented on voluntary basis along with other retirement benefit schemes, choice of joining NPS would rest with the employee.
The facility to transfer Approved Superannuation Fund to NPS has been enabled in NPS architecture. The transfer of corpus can be made in bulk as is where is basis or on an individual case to case basis. The relevant Circulars issued on the regard may be access from the following links:
Contributions to NPS are flexible and depending on the employer’s policy on compensation and retiral
benefits extended to its employees. The NPS contribution can be either:-
There is no mandate for the employer to contribute to employees’ NPS account.
Pension Funds registered with PFRDA are responsible for managing pension corpus in accordance with PFRDA Act, rules, regulations and investment guidelines issued by the Authority, as amended from time to time.
Employer adopting NPS has the option of:-
If the Employer/Corporate exercises choice of Pension Fund and Asset Allocation on behalf of Employee/Subscriber, then such Employee/Subscriber will have the option to revise the choices after 1 (one) year (i.e. 365 days) or else will continue with the existing choices made by employer (applicable to corporates adopting NPS on or after 14th Nov 2018)
To know more about selections of Pension Funds & Investment Choice please click here.
On adoption of NPS by an employer for its employees, the underlying activities get implemented through NPS architecture / platform which obviates the requirement for creation / maintenance of a Trust by the employer.
Charges related to NPS Tier-I account can be borne either by employer or employee, at the discretion of employer. Tier-II transaction charges are same as Tier-I and are borne by the subscriber.
Each intermediary is entitled to recover the following prescribed charges towards the services rendered:
Processing of withdrawal / exit
Minimum ₹200 to Maximum ₹400 (negotiable within slab only)
0.5% of contribution amount Minimum ₹30/- Maximum ₹25000/- (negotiable within slab only)
0.125% of corpus
Minimum ₹125 Maximum ₹500
Account Opening charges (One-time)*
Account Maintenance Charges (Per Annum)
Charge per transaction (Financial /Non-Financial)
NSDL Karvy
* In case a subscriber opts not to have a physical PRAN Card or Welcome Kit, reduced account opening charges of CRA are applicable as under:
Account opening with ePRAN card (in Rs.)
Welcome kit sent in hardcopy Welcome kit sent vide email only
Yes, the ‘employer contributions’ made in the NPS accounts of their employees (upto 10% of the salary) can be claimed for deduction as ‘Business Expense’ from Corporates Profit & Loss Account as per section 36(1)(iv)(a) of IT Act.
Yes. NPS can be voluntarily subscribed alongwith any other pension scheme(s). However, an individual cannot have multiple NPS accounts.
The amount of pension will depend on the amount of contributions made, accrual/returns on the investments and the portion of corpus utilised by the subscriber for purchasing annuity plan from any of the Annuity Service Providers empanelled with PFRDA.
Employee may submit the duly filled application form to the employer for authorization and further submission to the PoP or CRA, as the case may be, for opening the individual pension account.
Under NPS, the Pension Account is a unique identification number (Permanent Retirement Account Number - PRAN) allotted by CRA to each individual subscriber and the Pension Account (PRAN) can be transferred across employment or employer, location/geography.
Employee already having an NPS Account can provide the PRAN to employer for tagging the existing PRAN to their employer.
Employee can also transfer the pension account to the new employer (of any sector), if NPS is implemented in the new organization or may continue the NPS account under All Citizen Model through any registered PoP.
Under NPS account there are two types of accounts – Tier I & Tier II.
Tier-I is the Individual Pension Account, which is the default pension account having all the tax incentives under Income Tax Act.
Tier-II is an optional investment account available to a subscriber having an active Tier-I account. This account has no withdrawal restrictions and tax benefits. Tier-II is not a Pension Account.
| Tier – I | Tier – II |
| Individual Pension Account | Optional Account – Require an active Tier-I |
| Withdrawal / exit as per rules/regulations only | Unrestricted withdrawals |
| Min. Contribution Rs. 500 | Min. Contribution to open Rs. 1000 |
| Min. Contribution per year Rs. 1000 | Min. Contribution Rs. 250 |
| Tax benefits are available | No tax benefits on contribution/gains |
| Any Citizen aged between 18-70 is eligible | NRIs/OCIs are not eligible |
| Choose any Pension Fund / Investment Pattern | Choose any Pension Fund/ Investment Pattern * |
*Subscriber can select different Pension Fund and Investment Option for his/her NPS Tier I and Tier II accounts
An employee can open the pension account through the employer by submitting the duly filled application form (CSRF/NSRF) to the employer or submit the data online alongwith the following documents:-
For resident Individuals:
For NRIs and OCIs
| Non-resident Individual (NRI) | Overseas Citizen of India (OCI) |
| One Recent Photograph | One Recent Photograph |
| PAN Card | PAN Card |
| Indian Passport | OCI Card |
| Proof of address - India | Proof of address - foreign country |
| Proof for the Bank Account (NRE/NRO) | Proof for the Bank Account (NRE/NRO) |
Refer instructions in the subscriber registration form, for the list of acceptable proofs.
Subscribers can subsequently request to change the choices exercised as under:
i. Online – Login to your account or
ii. Offline - Physical Application to PoP
If the Employer/Corporate exercises choice of Pension Fund and Asset Allocation on behalf of Employee/Subscriber, then such Employee/Subscriber will have the option to revise the choices after 1 (one) year (i.e 365 days) or else will continue with the existing choices made by employer (applicable to corporates adopting NPS on or after 14th Nov 2018)
Subscriber can access their Pension Account through
i. Physical mode – by visiting his/her service provider (Employer/PoP)
ii. Online - using login credentials provided by CRA in the Account Opening Kit
a. Web-based login
b. Mobile Application
iii. Telephone - using the T-Pin received in the Account Opening Kit.
Toll Free numbers - NSDL 1800 222 080 and Kfintech 1800 208 1516
The contributions deducted from the salary of the employee will get invested as per the choices (Pension Fund and Asset allocation) recorded with CRA. The Pension Funds invest the funds according to the investment guidelines prescribed by PFRDA for each asset class. For detailed investment guidelines refer to the Circulars Section of PFRDA website.
An employee can make additional contributions to his/her pension account on a voluntary basis apart from the salary deductions, without any restrictions on number of contributions and amount through any of the following modes:
Physical mode – by visiting any of the registered service provider (PoP) and depositing cheque/cash alongwith the NPS contribution slip.
It normally takes three working days for the contributions to get reflected in your NPS account.
The process flow entails:
Subscribers will receive SMS & Email confirmations for credit of units in account.
CRA is mandated to send a physical copy of the Statement of Transaction (SoT) of your Pension Account to the correspondence address as recorded with CRA, once in a year. SOT is also emailed to the registered email address of the subscriber on a periodic basis which can also be accessed online by login into your account.
For changing the account details as recorded with CRA, subscriber has to submit the request to the Service Provider (PoP) or Employer, as the case may be:-
i. Online – Login to your account or
ii. Offline - Physical Application – Form S2
*For correction of Date of Birth, authentication by employer is mandatory
The performance of your NPS investments is available in the Statement of Transactions which can be accessed online through the subscriber web login or mobile app. Periodic statements are sent by the CRA to the registered email-id of the subscriber and a physical statement for the financial year is sent to the correspondence address of the subscriber.
The returns generated by the Pension Funds for each Asset Class is published on a weekly basis by NPS Trust and available at the following web link - http://npstrust.org.in/return-of-nps-scheme
The portfolio of Asset Classes managed by each Pension Fund is periodically published by the Pension Funds on their websites - http://npstrust.org.in/content/scheme-portfolio
The employer cannot forfeit pension corpus from NPS account, if employee resigns from the organization.
However, in case of employer being owned and controlled, either by the Central / State Government or a Government company, if so specifically provided in the service rules governing the terms of employment of the subscriber with it, the employer has the right to withhold its co-contributions including accruals thereon, for the purpose of recovery of the whole or part of any pecuniary loss caused, provided such loss is established, in any departmental or judicial proceedings, initiated against such subscriber by such employer./
A subscriber can withdraw from NPS in the following circumstances/conditions:
Subscriber also has the option to:-
defer receiving the lumpsum (60% corpus) till the age of 75 years or withdraw the same in installments till 75 years defer Annuity purchase (40% corpus) till the age of 75 years.
In case of unfortunate event of death of a subscriber, the nominee/legal heir can withdraw the entire accumulated corpus. The nominee / family members of the deceased subscriber can also purchase annuity, if they so desire.
On attaining the age of 60 years or superannuation, the NPS account of a corporate subscriber will be autocontinued under All Citizen Model upto 75 years of age. Subscriber can exercise the option of normal exit from NPS at any point of time he/she wishes, after attaining the age of 60 years / superannuation. At the age of 75 years, the account has to be closed mandatorily.
Partial withdrawals from your NPS account are allowed for dealing with contingency situations and following are the reasons/conditions for which partial withdrawal is allowed:
Requests for withdrawals from NPS can be initiated by the subscriber by login to his/her Pension Account or by submitting a physical form to the service provider (PoP) directly along with the specified documents. For more details please refer - https://www.pfrda.org.in/index1.cshtml?lsid=220
For the details of the ASPs empanelled with PFRDA please click here.
The broad variants of annuity plans offered by the ASPs are as under:
The pension amount would vary based on the annuity plan and the ASP chosen by the subscriber. For a comparative analysis of the annuity plans and the ASPs, please visit https://cransdl.com/CRAOnline/aspQuote.html
Subscriber will receive pension from the Annuity Service Provider (ASP) according to the Annuity Plan chosen and purchased by the subscriber from the ASP (Insurance Company) and the terms and conditions therein.
Withdrawal from NPS Tier-II account is permitted at any point of time, without any restrictions. You may also transfer the funds from your Tier-II account to Tier-I account (One-way Switch).
In case of closure of NPS Tier-I (pension account), balance outstanding in NPS Tier-II account will get withdrawn simultaneously and thereafter transferred to your Bank account.
For resolving subscriber grievances, the Authority has notified the PFRDA (Redressal of Subscriber Grievance) Regulations, 2015 and an online platform ‘Central Grievance Management System (CGMS)’ has been hosted for subscriber to lodge grievance online by logging to his/her NPS account.
A complaint/grievance has to be resolved by the intermediary concerned at the earliest and within a maximum period of 30 days of the receipt of the complaint.
If a subscriber is not satisfied with the resolution provided, he/she can escalate his grievance to the next higher level for resolution and the escalation matrix is as under:-
Tier-I account – Tax benefits on Contributions
NPS Contributions are eligible for tax deduction u/s 80 CCD (1) of Income Tax Act upto 10% of basic + DA or upto 20% of Gross Income for self-employed within the overall ceiling of Rs. 1.50 Lacs under Sec. 80 CCE.
An additional deduction upto Rs. 50,000/- is available u/s 80CCD 1(B) of Income Tax Act.
In case the subscriber receives contributions from the employer also, tax deduction under section 80 CCD (2) of Income Tax Act may be claimed by the subscriber in addition to the tax benefits available under Sec. 80 CCE, subject to an aggregate limit of Rs. 7.5 lakh of contributions made towards NPS, Recognized Provident Fund and Approved Superannuation Fund.
‘Employer contributions’ made by an in the NPS accounts of their employees (upto 10% of the salary) can be claimed for deduction as ‘Business Expense’ from Corporates Profit & Loss Account as per section 36(1)(iv)(a) of IT Act.
Tier-I account – Tax implications on Withdrawals / Exit
Maximum 60% of the total corpus received as lumpsum at the time of exit is not treated as income u/s 10 (12A) of Income Tax Act
Amount utilized for purchase of annuity plan from ASP on exit (minimum 40% mandatory upto 100% of corpus) is not treated as income u/s 80CCD (5) of Income Tax Act
Goods and Service Tax (currently 1.8%) is not applicable on annuity plan purchased through NPS on exit.
Amount received from partial withdrawal are tax exempt u/s 10 (12B) of Income Tax Act.
No tax benefits are available on contributions made in an NPS Tier-II account.
No tax rebates/special treatment for the gains arising out of investment in NPS Tier-II. The assessee shall be liable for taxation as per the marginal tax rate applicable to him/her.