The Government of India decided to roll out the Voluntary National Pension System (NPS) for all citizens from 01 May 2009. PFRDA is identified as Nodal Authority to manage NPS operations. PFRDA appointed Department of Posts as one of the Point Of Presence (POP). Department of Posts is providing services through POP Service Providers (POP SPs). All Head Post Offices in India are identified as POP SPs.

Service Offered :
Opening of new NPS (All Citizens Model) Account.
Subsequent Contributions.
All types of Service Requests.
Exit / Claim withdrawal requests.​

Types of Accounts :
Tier I and Tier II.
Tier I is Pension Account and mandatory.
Tier II is Savings Account and optional. Government Servants appointed on or after 01.01.2004 can open only Tier II Account since Tier I is maintained by their DDOs.​
Eligibility : All Citizens who does not comes under any NPS Sector and Age between 18 & before 65 years of age.
Income Tax benefits There is an additional tax benefit upto Rs.50,000/- for investment in NPS (All Citizen Model).

FATCA ​Subscribers registered on or after 01.07.2014 are mandatorily required to submit FATCA Self–certification.


What is NPS?
National Pension System (NPS) is a voluntary defined contribution retirement savings scheme.

Objective of NPS
The scheme is designed to enable systematic savings during the subscriber’s working life which could lead to sustainable and adequate retirement income to every citizen of India.

When was NPS launched?
The Government of India (GOI) rolled out the NPS for all citizens of India from May 1, 2009 and Corporate sector from December, 2011. For Central Government Employees, NPS was active right from 2004.

NPS account types
Under NPS, two types of account would be available to subscribers i.e. Tier I & Tier II; Tier I account – where subscribers contribute his / her savings (may include employers contribution in case of Corporate sector) for retirement into a non-withdrawable account, and a Tier II account – a voluntary savings account from which subscribers are free to withdraw their savings whenever he wishes. An active Tier I account will be a pre requisite for opening of a Tier II.

Who can open NPS account?
All citizens of age from 18 years to 60 years of age, including NRIs. More specifically, NPS account and contribution can be done by:

  • Any Individual
  • Central Government Employees
  • State Government Employees
  • Private Sector Employees (Corporate)

Who is regulating NPS?
Pension Fund Regulatory and Development Authority (PFRDA): A regulatory body set up by the Government of India to develop and regulate the pension market in India. PFRDA is the regulator for NPS.

Which entities are involved in NPS?

  • Point of Presence (POP)- Banks and Agencies through which subscriber opens/invests in NPS) (Eg. SBI, Canara Bank etc.)
  • Pension Fund Managers (PFM)- Authority as a Pension Fund for receiving contributions, accumulating them, investing and making payments to the subscriber in the manner as may be specified by the Authority.
  • Central Recordkeeping Agency (CRA)- Maintains the data and records
  • Annuity Service Providers (ASP)- Pension provider to the subscriber after retirement

How to open NPS account?
Any Individual who wants to get registered as a subscriber and wants to open a Permanent Retirement Account (PRA)(Tier I and/or Tier II) in NPS would submit the duly filled form (Composite application form for subscriber registration) with other supporting KYC documents to POP-SP (Eg. Banks and Financial institutions authorized to open NPS). For only Tier II account, an individual with an active Tier I account needs to approach the associated POP-SP and submit a copy of the PRAN Card along with Tier II activation form. For corporate/ Government Employees, NPS account opening is done through the employer.

How can I contribute to NPS?
To contribute in Tier I and Tier II account, the subscriber needs to deposit the contribution amount to any POP-SP (eg. Banks). In case of Government Employees / Corporate subscribers, contributions are deducted from the Subscribers salary.

What is the minimum amount that I should invest?
At the time of account opening, Minimum contribution should be Rs.500 for Tier I and Rs.1000 for Tier II. Afterwards, minimum amount per contribution should be Rs.500 for Tier I and Rs.250 for Tier II.  In a year, the minimum contribution should be Rs.6000 for Tier -I account. For Tier II account, it is essential that a minimum balance of Rs.2000 is kept at the end of each financial year.

Maximum amount that one can invest in NPS
There is no limit on the maximum amount that can be deposited in NPS.

What happens if I fail to contribute the minimum?
A penalty amount of Rs.100 per year will be levied and the account would be frozen. Even as account is frozen, the money will stay invested until the fund value does not reach zero. On payment of penalty and minimum contributions, the account will get active.

How many contributions to be made as a minimum?
In both Tier I and Tier II account there has to be at least one contribution in a financial year. Over and above the mandated limit of a minimum of one contribution, a subscriber may decide on the frequency of the contributions across the year as per his / her convenience. No maximum limit has been mandated.

What are the charges?
The charges for account opening, contribution, maintenance are decided by PFRDA and updated time to time. Refer for more details.

What happens after my retirement?
On retirement, subscriber can withdraw a maximum of 60% of the accumulated wealth as a lump sum amount. At least 40% of the accumulated pension wealth has to be utilized for purchase of annuity providing for monthly pension. 100% withdrawal is allowed only if total accumulated corpus less than Rs.2,00,000 at the time of retirement.

What types of Withdrawals are allowed under NPS?
Following Withdrawal categories are allowed:

  1. Upon Normal Superannuation (Retirement) – At least 40% of the accumulated pension wealth of the subscriber has to be utilized for purchase of annuity providing for monthly pension of the subscriber and the balance is paid as lump sum to the subscriber. In case the total corpus in the account is less than Rs. 2 Lakhs as on the Date of Retirement (Government sector)/attaining the age of 60 (Non-Government sector), the subscriber (other than Swavalamban subscribers) can avail the option of complete Withdrawal.
  2. Upon Death – The entire accumulated pension wealth (100%) would be paid to the nominee/legal heir of the subscriber and there would not be any purchase of annuity/monthly pension.
  3. Exit from NPS Before the age of Normal Superannuation – At least 80% of the accumulated pension wealth of the subscriber should be utilized for purchase of an annuity providing the monthly pension of the subscriber and the balance is paid as a lump sum to the subscriber.

What is Annuity (pension)?
An annuity or pension is a financial instrument which provides for a regular payment of a certain amount of money on monthly/quarterly/annual basis for the chosen period for a given purchase price or pension wealth. In simple terms it is a financial instrument which offers monthly/quarterly/annual pension at a specified rate for the period you chose. In the context of NPS, Annuity refers to the monthly sum received by the subscriber from the Annuity Service Provider (ASP). A percentage of the pension wealth as decided by the subscribers (minimum 40% & 80% is to be invested with ASP in case Withdrawal is due to Superannuation & Pre-mature Exit respectively) is utilized for purchase of Annuity from the ASP. 

Who pays the pension amount to me?
Indian Life Insurance companies which are licensed by Insurance Regulatory and Development Authority (IRDA) are empaneled by PFRDA to act as Annuity Service Provider’s to provide annuity services to the subscribers of NPS. 

Is nomination available?
Nominee(s) registered in the CRA system can submit the Withdrawal request to CRA through the subscriber’s associated POP/POP-SP (through the associated Corporate in case of Corporate model subscribers). If the Nominee was not registered with CRA, legal heir(s) can submit the Withdrawal request.

What is PRAN card?
The PRAN (Permanent Retirement Account Number) Card is a document with PRAN, subscriber’s name, father’s name, photograph and signature/thumb impression. On successful registration of NPS, a PRAN will be allotted to the subscriber. A PRAN Kit containing PRAN card, Subscriber details and an information booklet is sent to the subscriber’s registered address. A copy of the card is required for Tier II activation and also for subsequent contribution in Tier II account.

Who manages my NPS contribution?
The money invested in NPS is managed by professionally run fund management companies (PFM), selected by PFRDA. Subscriber has the option to choose from any of the PFRDA approved fund managers. As on date, the approved fund managers are:

  • SBI Pension Funds.
  • LIC Pension Fund.
  • UTI Retirement Solutions.
  • HDFC Pension Fund.
  • ICICI Prudential Pension Fund.
  • Kotak Pension Fund.
  • Reliance capital Pension Fund.

Where my money is invested?
The sets of assets considered for investment by NPS funds are segregated based on their risk {return characteristics)

  • Asset Class E – Investments in predominantly equity market instruments. Maximum investment in this class is 50% of total contribution.
  • Asset Class C- investments in fixed income instruments other than Government securities.
  • Asset Class G – investments in Government securities.

Can I choose where to invest my money?
Yes. The NPS offers two approaches to invest in your account

  1. Active choice – There are Individual Funds (E, C and G Asset classes). In active choice, the Subscriber has to select a Pension Fund Manager and has to mention the ratio of funds to be invested among E, C & G.
  2. Auto choice – There is a Lifecycle Fund and the subscriber has to select a Pension Fund Manager and his / her funds will be invested as per the Life cycle fund matrix on the basis of the age of the subscriber.

What is the rate of interest in NPS?

Since NPS is market-linked, rates of interest will vary as per market conditions.

How are the returns calculated in NPS?

Money contributed by subscriber is invested in any of the chosen Fund (PFM). The PFM invests the money in Shares/Stocks, Corporate Debt and Government Bonds as per the ratio chosen by the subscriber. The funds regularly declare the Net Asset Value(NAV) at the end of each business day. Accordingly, based on the NAV, units are credited in the subscriber’s account. The present value of the investment is arrived by the units held multiplied by the NAV.

Can I get guaranteed investment returns?

No. The return under NPS is market driven. Hence, there is no guaranteed/defined amount of return. The returns generated through investments are accumulated and is not distributed as dividend or bonus.

NPS Tax Benefits

Voluntary contribution towards NPS, would result in an additional income tax benefit of Rs. 50,000 under section 80CCD (1B). This would be over and above the ceiling limit of Rs.1,50,000 as prescribed under section 80CCE.

Documents needed to avail NPS tax benefits

The print out of the NPS contribution transaction Statement could be used as a document for claiming Tax benefit.

Tax treatment after retirement

NPS is currently subject to the Exempt Exempt Tax (EET) structure. This means that contributions to NPS and accumulation/growth of these are not taxed, but the lump sum withdrawn on exit from NPS is taxed. The amount that is used to buy the annuity is however not subject to tax. This means that if an investor uses 100% of the accumulated corpus for buying an annuity, then he won’t be subject to taxation. Only the pension income that he gets will be taxed like any other pension.

Can I invest in NPS if I’m already contributing to Provident Fund (EPF)?

Yes. Investment in NPS is independent of your contribution to any Provident Fund.

What happens when I change jobs?

NPS provides hassle-free options to transfer whenever subscriber changes jobs or location anywhere in India. For voluntary NPS accounts, employer contribution is not applicable and NPS account is not affected by any job/location change.

Can I get loan under NPS?

At present, interim utilization of pension wealth (such as availing of loan) by the subscriber before exit is not allowed under NPS. However, in line with the PFRDA Act 2013, PFRDA is considering the option of interim withdrawal and, the same is yet to be finalized. For more detailed guidelines/circulars regarding withdrawal, you may visit PFRDA website ( as well as on CRA website (

How can I register a grievance/complaint?

Grievance / complaints can be raised through Call Centre using T-PIN or through CRA website using I-PIN. A subscriber can also contact his / her POP-SP, who can also raise a grievance on his/her behalf.

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