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Image National Pension System (NPS)

  • This scheme has been introduced by Pension Fund Regulatory and Development Authority (PFRDA) to promote old age income security to all citizens of India including workers of the unorganized sector.
  • NPS is a voluntary, defined contributions retirement savings scheme & is administered / regulated by PFRDA. It is operated with the participation of Central Record Keeping Agency (CRA) – NSDL e-Governance Infrastructure Limited & KFin Technologies Private Limited.
  • Resident or Non- Resident Indian between age group of 18 to 70 years; salaried or self employed can join this scheme.
  • The people within age group 60-70 can also join/re-join NPS.
  • Account can be opened by Individual and Corporate.
  • Every individual subscriber will be issued a Permanent Retirement Account Number (PRAN) card having 12 digit unique numbers.
  • Under NPS account, two sub-accounts – Tier I & II are provided. Tier I account is mandatory and the subscriber has option to opt for Tier II account opening and operation. Tier II account can be opened only when Tier I account exists.
  • Account can be opened Online and Offline through authorized branches.
My NPS by NSDL

Apply online (New link by Kfintech)

Unique Selling Proposition (USP’s):

  • Flexible: The employer can have the option to select the investment choice for all its employees or may give the option to the employees. The employees have the option to choose from an assortment of asset classes (Equity, Corporate Debt, Government Securities and Alternate Investment Fund) and have the freedom to choose one of the registered Pension Fund.
  • Online Access- 24 X 7 X 365: Riding on a highly efficient technological platform NPS provides online access to accounts to the subscribers.
  • Regulated: The funds are managed by professional Pension Funds regulated and actively monitored by PFRDA, the Regulator set up through an Act of Parliament.
  • Portable: The NPS account (PRAN) can be operated from anywhere in the country even if one changes the job location or the job itself.
  • Tax Incentives: Tax benefits are available on both employee and employer contributions.

Salient features of these sub-accounts are mentioned below :

  • Tier-I account: A retirement and pension account which can be withdrawn only upon meeting the exit conditions prescribed under NPS. The applicant shall contribute his/her savings for retirement into this account. This is the retirement account and applicant can claim tax benefits against the contributions made subject to the Income Tax rules in force. Initial amount while opening NPS account is Rs. 500/- with Minimum Yearly Contribution is Rs. 1000/-. There is no upper limit for the maximum contribution.
  • Tier-II account: This is a voluntary investment facility. The applicants are free to withdraw his/her savings from this account whenever he/she wishes. This is not a retirement account and applicant can’t claim any tax benefits against contributions to this account. Minimum amount per contribution is Rs 250/- & no upper limit for the maximum contribution.
Funds will be invested in 4 different classes:

Equity, Government Securities, Corporate Debts & Alternate Investment Fund (A). The investor has 2 Investment options for managing the fund: Auto and Active.

  • Active Choice: - Under this option, subscribers are free to allocate the investment across the asset class provided E/C/G/A. Subscriber decides allocation pattern amongst E, C, G and A as mentioned below.
Asset Class Cap on Investment
Equity (E) 75% (Upto age 50)
Corporate Bonds (C) 100%
Government Securities (G) 100%
Alternate Investment Fund (A) 5%
  • Active choice – This is the default option under NPS and wherein the management of investment of fund is done automatically based on the age profile of the subscriber.
Age (In Years) Asset Class (E) Asset Class (C) Asset Class (G)
Upto 35 50% 30% 20%
36 48% 29% 23%
37 46% 28% 26%
55 and Above 10% 10% 80%
Type of Auto Life Cycle Fund LC50/ LC25/ LC 75:
  • LC 75- It is the Life cycle fund where the Cap to Equity investments is 75% of the total asset (Aggressive)
  • LC 25- It is the Life cycle fund where the Cap to Equity investments is 25% of the total asset (Conservative)
  • LC 50- It is the Life cycle fund where the Cap to Equity investments is 50% of the total asset (Normal/ Moderate)
Pre Mature Closure / Maturity / Partial Withdrawal:

Exit & Withdrawal:
The withdrawal treatment is different based on the criteria that if the Subscriber registration is before 60 years and after 60 years.
For Subscriber registration after 60 years:
  1. Pre Mature Closure:
  • The subscriber has to compulsorily annuitize 80% of the accumulated pension wealth and the remaining 20% can be withdrawn as lump sum.
  • If Corpus <2.50 Lakhs, complete withdrawal permitted.
  • In case of death of the subscriber - Entire accumulated pension fund will be paid to the nominee/s or legal heirs, as per norms. No family pension under the scheme.
  1. On Maturity:
  • After attaining 60 years of age, upto 60% of the corpus can be withdrawn. Subscriber is required to invest minimum 40% of the accumulated savings (Pension Wealth) to be kept as annuity. At the time of maturity whole 60 % of corpus amount is tax exempted.
  • If Corpus < 5.00 Lakhs, complete withdrawal permitted.
  • For Subscriber registration after 60 years: At the time of withdrawal, if the Subscriber exits after completing 3 years of holding NPS account 60-40 option is available (40% annuity is minimum condition, if the subscriber wants more pension he can allocate higher annuity percentage). If the Subscriber exits his NPS account before completing 3 years then 20% lumpsum & 80% has to be allocated for annuity option is available.
  • Can defer the withdrawal of eligible lump sum amount till the age of 75 years and withdraw the same in 10 annual instalments.
  • Annuity purchase can also be deferred for maximum period of 3 years at the time of exit.
  • For the subscriber under UoS, if the exit option or deferment option or continuation is not exercised then by default the Subscriber is taken into continuation mode. This is applicable only for UOS sector subscriber. For corporate sector Subscriber, the Subscriber has to give the concerned request (continuation/deferment/exit) 15 days prior to his retirement date. After the Subscriber’s retirement date, if he/she wishes to continue or defer a written application has to be sent to NPS trust for necessary action.
Partial Withdrawal:
  • Subscriber should be in NPS for at-least 3 years.
  • Amount should not exceed 25% of the contributions made by the subscriber during that period.
  • Purpose for which partial withdrawal allowed are:
  • Higher education of children
  • Marriage of children
  • Purchase or construction of residential house or flat
  • Treatment of specified illness
  • Disability of more than 75%
  • Skill Development/ re-skilling or any other self –development activities
  • Establishment of own venture or any start-ups Other reasons as specified from time to time by PFRDA.
  • Frequency of partial withdrawal:
  • Max 3 (three) times during entire tenure
  • The Gap between the consecutive partial withdrawals has been removed.
Service Charges Method of deduction
Initial Subscriber Registration Rs. 200/- + GST To be collected upfront
All Contribution 0.25% of the contribution ; Min Rs 20/- & Max Rs 25000/- + GST
All Non-Financial Transaction Rs 20/- + GST
Persistency Rs. 50/- per Annum (only for NPS-All Citizen ) Through cancellation of units
Tax Benefits to the Employees & Employer :

    1. Benefits to Employer:

  • A contribution made by the employer (Upto 10% of Basic + DA) is allowed as Business expense under Sec 36 (1) iv (a) of I.T Act 1961.

    2. Benefits to Employee:

  • Employee’s own contribution is eligible for tax deduction upto 10% of Salary (Basic + DA) under Sec 80 CCD(1) within the overall ceiling of Rs. 1.50lakhs under Sec 80 CCE of the I.T Act
  • Employee also gets tax deduction for the contribution made by the employer under section 80 CCD (2) of I.T Act upto 10% of salary (Basic + DA) which is in addition to the tax benefit available under sec 80 CCE. No monetary ceiling.
Note:- Subscriber is allowed tax deduction in addition to the deduction allowed under Sec 80 CCD(1) for additional contribution in his NPS account subject to maximum investment of Rs. 50000/- under sec 80 CCD 1 (B).
Process of NPS account opening:
NPS PRAN library
is implemented for instant PRAN generation through “NPSPRAN” menu in Finacle for NPS account opening and “NPSCOLL” for subsequent contribution and service related request. Our Mumbai Samachar Marg branch acts as the Point-of- Presence (PoP) for the scheme. All concerned are requested to take note of the same and ensure compliance in NPS account opening;
  • Branches to collect NPS account opening applications from customers and check the application as well as KYC documents as per guidelines of NPS.
  • Subscriber Registration through NPSPRAN menu in Finacle.
  • On subscriber registration in Finacle, system will generate receipt number & PRAN automatically.
  • Subscriber registration process is of maker-checker concept, wherein one user will feed the details which shall be verified by another user.
  • After verification of subscriber registration, branches will be able to make the transaction.
  • After posting of transaction, branch will be able to generate the covering letter which contains PRAN details and receipt numbers.
  • Branches have to send application form along with covering letter to application collection Nodal Office, Mumbai (Union Bank of India Government Business Division, Ground Floor, Mercantile House, 708, Magazine Street, Reay Road, Mumbai, Maharashtra-400010).
  • Branches are advised to keep a copy of form for records.
  • PRAN card will be issued to subscriber by post / courier by NSDL ltd after successful submission of application forms.
  • Generated PRAN will be activated in T+2 Days.
  • Branch to ascertain that photo and signatures are in place, and should be in prescribed format, signatures across the form & photo should be avoided.
Consider Bank GBD Circular Letter 16018 dated 26.11.2018 for detailed NPS account opening and procedure.

Any changes & updation of the scheme like AGE, FORMS and PENSION FUND MANAGER (PFM) etc. will be intimated and modified in the Finacle as per Regulatory and CRA guidelines.