Retail NPS

  • What is NPS?

    National Pension System (NPS) is an investment cum pension scheme initiated by Government of India to provide old age security and pension of all citizen of India. The NPS was rolled out for all citizens of India on May 01, 2009. The Scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA).

  • Who can subscribe to NPS?

    A citizen of India, whether resident or non – resident can join the NPS subject to following conditions

    • Subscriber should be between 18 – 65 years of age as on the date of submission of her application
    • Subscriber should comply with the prescribed Know Your Customer (KYC) norms as detailed in the Subscriber Registration Form for NPS

  • Can HUF, OCI and PIO join NPS?

    No, HUF, OCI and POI are not allowed to join NPS

  • How the Scheme works?

    The scheme is based on unique Permanent Retirement Account Number (PRAN) which is allotted to each Subscriber upon joining. Subscriber contributes towards NPS (directly or through the Employer she is working with) during her working life. On retirement or exit from the scheme, the Corpus is made available to her with the mandate that some portion of the Corpus must be invested in to Annuity to provide a monthly pension post retirement or exit from the scheme

    NPS Accounts

  • What are different types of NPS Account?

    Under NPS, Subscriber gets the option to open two accounts. A Tier I account is mandatory to open in order to join NPS. Difference between Tier I and Tier II accounts are as mentioned below

    Tier I NPS Account Tier II NPS Account
    It is also known as Pension account It is known as investment account
    Withdrawal from this account is permitted after 10 years of account opening or attaining the age 60 years whichever comes early Withdrawal from this account can be done at any point of time as per Subscriber’s need
    Minimum annual contribution required for this account is Rs. 1000 NA

  • Can a Subscriber open more than one NPS account?

    No. In the entire life span Subscriber will be allowed to open only one NPS Account. The NPS Account number which is also called PRAN is fully portable across job and geography.

  • Is it mandatory to open Tier II NPS Account at the time of opening Tier I NPS Account?

    No. Tier II NPS Account is optional to the Subscriber. Subscriber can open Tier – II NPS Account later on as well

  • Can a Subscriber open only Tier II NPS Account?

    No. Active Tier – I NPS Account is a must criterion for opening Tier – II NPS Account. Subscriber cannot apply for only Tier – II NPS Account

    Investment of Funds under NPS

  • How many funds are there in NPS?

    NPS offers 3 funds to Subscribers

    • Equities (E)
    • Corporate Bonds (C)
    • Government Securities (G)

    NPS restricts investment towards Equities Fund to 50% of contribution amount for both Tier I and Tier II NPS Accounts. However, Subscriber can invest up to 100% in Corporate Bonds or Government Securities Fund.

  • How the investment happens across three funds?

    There are two investment options available under NPS

    • Active Choice: under this option, Subscriber gets the flexibility to choose her own asset allocation across Equity, Corporate Bonds and Government Securities. Investment in Equity is restricted to 75% of Contribution amount. However, in Corporate Bonds and Government Securities Subscriber can invest 100% of Contribution amount
    • Auto Choice: under this option investment across Equity, Corporate Bonds and Government Securities is done as per the age of the Subscriber as per below chart

      LC 75 – Aggressive Life Cycle Fund

      AgeAsset Class EAsset Class CAsset Class G
      Up to 35 years751015
      36 years711118
      37 years671221
      38 years631324
      39 years591427
      40 years551530
      41 years511633
      42 years471736
      43 years431839
      44 years391942
      45 years352045
      46 years322048
      47 years292051
      48 years262054
      49 years232057
      50 years202060
      51 years191863
      52 years181666
      53 years171469
      54 years161272
      55 years & above151075

      LC 50 – Moderate Life Cycle Fund

      AgeAsset Class EAsset Class CAsset Class G
      Up to 35 years503020
      36 years482923
      37 years462826
      38 years442729
      39 years422632
      40 years402535
      41 years382438
      42 years362341
      43 years342244
      44 years322147
      45 years302050
      46 years281953
      47 years261856
      48 years241759
      49 years221662
      50 years201565
      51 years181468
      52 years161371
      53 years141274
      54 years121177
      55 years & above101080

      LC 25 – Conservative Life Cycle Fund

      AgeAsset Class EAsset Class CAsset Class G
      Up to 35 years254530
      36 years244333
      37 years234136
      38 years223939
      39 years213742
      40 years203545
      41 years193348
      42 years183151
      43 years172954
      44 years162757
      45 years152560
      46 years142363
      47 years132166
      48 years121969
      49 years111772
      50 years101575
      51 years91378
      52 years81181
      53 years7984
      54 years6787
      55 years & above5590

  • How the above fund allocation chart works under Auto Choice Investment option?

    The first allocation is made as per the age of the Subscriber at the time of joining the Scheme as shown in the chart. For example, if the entry age of Subscriber is 42 years, her allocation towards E, C and G would be 36%, 23% and 41% respectively. On the next date of birth of the Subscriber, the portfolio will be re-aligned as per the next level chart i.e for the age 43. The re-alignment of portfolio is system driven

  • Is there any guaranteed returns provided under NPS?

    NPS returns are market linked. Depending on the returns generated under Equity, Corporate Bonds and Government Securities funds, the Corpus will be created.

  • Can a Subscriber change the fund allocation pattern under Active Choice?

    Yes. Subscriber can switch the asset allocation pattern under Active Choice twice in a financial year.

  • Can a Subscriber switch between Active Choice and Auto Choice?

    Yes. Subscriber gets this flexibility. This can be done twice in a financial year.

  • If a Subscriber is under Active Choice and have changed the fund allocation in a particular year and wants to switch from Active Choice to Auto Choice, can this be allowed?

    yes, it is possible once in a financial year

    Joining NPS

  • What is the process of joining NPS?

    subscriber needs to send duly filled NPS Application Form along with KYC documents (self attested copy of PAN card and Address Proof) and filled NCIS form to below address for account opening. Upon joining, Permanent Retirement Account Number (PRAN) is allotted to Subscriber. Further PRAN Card, IPIN and TPIN are sent to Subscriber address by CRA

    Priyanka Jaisinghani, HDFC Pension Management Company Limited, 14th floor, Lodha Excelus, Apollo Mills Compound, N M Joshi Marg, Mahalaxmi, Mumbai – 400 011.

  • Does Subscriber need to deposit any minimum amount at the time of submission of NPS application form?

    Yes. For account opening, a minimum contribution is required as shown below:

    • For Tier I account opening: Rs. 500
    • For Tier II account opening: Rs. 1,000

    If Subscriber is opening Tier I and Tier II account simultaneously, minimum Rs.1,500 needs to be deposited as initial contribution.

    However in order to avail of tax benefit u/s 80CCD (1B) you can deposit Rs. 50K at once in Tier I Account

    Contribution towards NPS accounts

  • What process Subscriber needs to follow to make contribution to NPS Account?

    Subscriber can contribute towards NPS through any of the POPs by Cheuqe / Demand Draft / Cash.

  • Is there any restriction on frequency of contribution?

    There is no restriction in terms of frequency of contribution. Subscriber has the option to make the contribution in any mode – monthly, quarterly, half yearly or yearly.
    Also, Subscriber can make ad – hoc contribution as well.

  • Can Subscriber increase or decrease the contribution amount in subsequent years?

    Yes, NPS offers this flexibility. Subscribers are allowed to alter the contribution amount as per the suitability.

  • Does Subscriber get any alert on credit of contribution amount to his / her NPS accounts?

    Yes, once the contribution is credited to Subscriber’s NPS account, an email alert as well as a SMS alert is sent to the registered email ID and mobile number of the Subscriber

    Account Maintenance

  • Can a Subscriber change / modify data in the NPS system after joining NPS?

    Yes. Subscriber needs to submit the request along with the Service Charge of Rs. 20 plus Service Tax to the POP for initiating the modification.

  • From where the forms for service requests can be obtained?

    The same can also be obtained from CRA website: The link is https://npscra.nsdl.co.in/non-goverment-form.php

  • Can a Subscriber request for a duplicate PRAN Card?

    Yes. In case of loss or damage of PRAN Card, the Subscriber needs to submit a duly filled S2 form to the POP for issuance of duplicate PRAN Card. Rs.50 plus applicable Service Tax will be deducted by CRA for issuing duplicate PRAN

  • Does Subscriber get any physical statement for NPS account?

    Yes. An annual statement containing details of the unit holdings is issued by CRA to Subscriber’s registered address within 3 months of the end of every financial year

  • How does Subscriber get its Statement of Transaction (SOT) on ad-hoc basis?

    Subscriber can get POP branch to obtain the account statement. Subscriber can also view / print the SOTs by logging into CRA website https://cra-nsdl.com/CRA/ using the I-PIN

    Non fulfillment of required contribution criteria

  • What happens if the minimum annual contribution of Rs.1,000 is not invested in Tier - I NPS Account?

    In case the Subscriber fails to contribute minimum Rs.1000 in Tier - I NPS Account, the PRAN is frozen. Once the PRAN is frozen, Subscriber is not allowed to do any transaction (financial / non – financial) in both - Tier - I and Tier - II NPS Accounts.

  • Does Tier - II NPS Account of the Subscriber also get frozen if Tier - I NPS Account is frozen?

    Yes, if Tier I account of an Subscriber is frozen because of non fulfillment of criteria, Tier II account is automatically get frozen.

  • What is the process of unfreezing the PRAN?

    Subscriber can unfreeze the NPS Account by paying Rs.500 as minimum contribution amount and Rs.100 as penalty. POP charges to be added to it.

    Tax benefits and treatment under NPS

  • What are the tax benefits available to Subscribers for contribution under corporate model?

    Subscriber gets the following tax benefits on contributions

    NPS Account Tax Benefit Tax Treatment
    on withdrawal
    Tier I Salaried Individual
    • Investment up to 10% of Salary (Basic + Dearness Allowance) is deductible from taxable income u/s 80CCD (1) of Income Tax Act, 1961 subject to 1.5 lakhs limit of section 80C
    • Additionally, investment up to Rs.50,000 is deductible from taxable income u/s 80CCD (1B) of Income Tax Act, 1961

    Self Employed Professionals
    • Investment up to 20% of Gross Annual Income is deductible from taxable income u/s 80CCD (1) of Income Tax Act, 1961 subject to 1.5 lakhs limit of section 80C
    • Additionally, investment up to Rs.50,000 is deductible from taxable income u/s 80CCD (1B) of Income Tax Act, 1961
    • Up to 40% of Corpus withdrawn in lump sum is exempt from tax
    • Balance amount invested in Annuity is also fully exempt from tax
    • Pension received out of investment in Annuity is treated as income and will be taxed appropriately
    Tier II There is no tax benefit on investment towards Tier II NPS Account Indexation benefit can be claimed

    Partial withdrawal from NPS Account

  • Is partial withdrawal allowed from Tier I NPS Account?

    Yes. Subscriber can withdraw up to 25% of contributed amount towards Tier - I NPS Account after 10 years. Additionally, Subscriber is allowed to withdraw from Tier I NPS account twice after a gap of 5 years after first withdrawal.

  • What are the conditions of partial withdrawal?

    Withdrawal from Tier - I NPS account would be permitted for specific purposes like Child’s marriage, higher education, treatment of critical illnesses etc.

  • What process Subscriber needs to follow for withdrawal from Tier - II NPS Account?

    In order to withdraw from Tier - II NPS Account, the Subscriber needs to submit a duly filled UOS-S12 form to the associated POP branch

    Exit from NPS

  • When can a Subscriber exit from NPS?

    Subscriber can exit from NPS after 10 years of account opening or attaining 60 years of age whichever is early.

  • How the payout happens if an Subscriber exists from NPS?

    Primary objective of Tier – I NPS Account is to create a Corpus which can be used at the time of retirement to buy pension for the Subscriber / Nominee. Hence, there is a restriction imposed on lump sum amount accessible to Subscriber on exit as mentioned below

    Exit before the age 60 years Exit at Retirement age defined by the Corporate
    • Up to 20% of Corpus can be withdrawn in lump sum
    • Balance amount needs to be invested in Annuity
    • Up to 60% of Corpus can be withdrawn in lump sum
    • Balance amount needs to be invested in Annuity
    If the Corpus is less than or equal to Rs.1 lakh, there is no need to invest into Annuity. Entire amount can be withdrawn in lump sum If the Corpus is less than or equal to Rs.2 lakhs, there is no need to invest into Annuity. Entire amount can be withdrawn in lump sum
  • Is it mandatory to withdraw the amount immediately at the time of exit from NPS?

    In case of exit from NPS on retirement age defined by the Corporate, Subscriber can defer the withdrawal option till 10 years depending on the market condition. Subscriber can withdraw this amount either in lump sum or take the same in 10 installments before attaining the age 70 years.

    However, in case of pre – mature exit from NPS (before attaining the age of 60 years), Subscriber does not have option to defer the option.

  • What happens to the funds if Subscriber opts to defer the withdrawal (on attainment of 60 years of age defined by the Corporate)

    The fund would continue to remain invested. The Pension Fund Manager, Scheme Preference and Asset Allocation Pattern will remain the same as these were at the time of vesting

    Investment in Annuity

  • In case the Subscriber opted for withdrawal from Tier – I NPS Account before the age 60, at what age annuity will start?

    In case of pre-mature withdrawal, Subscriber needs to invest in Annuity immediately. Depending on the Annuity Plan he / she has invested in, annuity would start.

  • Can a Subscriber change the annuity service provider?

    No, this option is not available.

  • Can a Subscriber use 100% of accumulated wealth to buy annuity plan?

    Yes. Subscriber can use 100% of accumulated wealth to buy annuity plan

  • In case of death of Subscriber, what happens to the annuity plan bought by her?

    It will depend on the kind of annuity plan opted for the Subscriber. For an example, if the annuity plan is joint life annuity plan, on death of Subscriber, the spouse will get the annuity till he / she is alive

    Death Proceedings

  • In case of death of the Subscriber, who can claim the corpus in Tier I and Tier II NPS Accounts of diseased?

    In case of death of the Subscriber, option will be available to the nominee to receive 100% of the NPS pension wealth in lump sum. In case, nominee is not there legal heir to the Subscriber can claim the corpus.

  • What is the process of claiming the corpus after death of the Subscriber?

    The beneficiary needs to submit the request to POP

    Charges under NPS

  • What are the charges under NPS and how these charges are levied?

    There are various intermediaries involved under NPS. The charge for these intermediaries is regulated by PFRDA. Below are the details of charges under NPS (exclusive of Service Tax)

    Intermediary Charge Head Charge Frequency of deduction Mode of deduction
    PoP Subscriber Registration Charge Rs.125 One time at the time of registration Deducted from the initial contribution amount deposited by Subscriber
    Contribution processing charge 0.25% of the Contribution amount subject to minimum Rs.20 and maximum Rs.25,000 On each transaction Deducted from the amount deposited by the Subscriber
    Non – Financial Transaction Processing Charge Rs.20 On each transaction Collected from Subscriber separately
    CRA (NSDL) NPS Account opening charge Rs.40 One time Collected by cancelling units on a quarterly basis
    Account Maintenance charge Rs.95 Annual
    Financial transaction processing charge Rs.3.75 On each transaction
    Pension Fund Manager Asset Management Charge 0.01% Annual Adjusted before NAV publication
    Custodian Asset Servicing Charge 0.0032% Annual
    NPS Trust Trust Management Charge 0.01% (no Service Tax applicable) Annual

    *subject to minimum Rs.20 and maximum Rs.25000 per PRAN per Transaction

    **Service Tax is not applicable on Trust Management Charge.

  • Does Subscriber need to pay POP charges over and above the contribution amount?

    No, the POP charges would be deducted from the Contribution amount.

  • What is meant by Non – Financial Transaction?

    Transactions like change of address, contact details etc are called non – financial transactions.

  • How is the Non – Financial Transaction Charge recovered by POP?

    Subscriber needs to pay Rs.20 + Service Tax by Cheque at the time of submitting request for process any Non – Financial transaction