About NPS

National Pension System (NPS) is a defined contribution pension scheme notified by Government of India vide Ministry of Finance notification number F. No. 5/7/2003-ECB&PR, dated 22nd December, 2003. NPS enables an individual to undertake retirement planning while in employment. With systematic savings and investments, NPS facilitates accumulation of a pension corpus during their working life. It is regulated by Pension Fund Regulatory and Development Authority (PFRDA).

NPS is an easily accessible, low cost, tax-efficient, flexible and portable retirement savings account. It provides a platform for savings to create a Retirement Corpus (Pension Wealth) through 4 baskets of investments i.e. Equity (E), Corporate Bonds (C), Govt. Securities (G) and Alternate Assets (A) commonly known as E, C ,G and A.

Any citizen of India, whether Resident or Non-Resident between 18-70 years of age can join the NPS.

NPS is one of the best Retirement Planning Scheme available in the country today. It costs little but delivers more.

It has following extra ordinary benefits:

  1. Unique Tax Benefits: NPS offers Tax-Deduction benefits under three different sections of the Income Tax Act, 1961 namely 80CCD(1), 80CCD(1B) and 80CCD(2).
  2. EEE Status: NPS enjoys 'exempt, exempt, exempt' tax treatment. Now there is complete tax exemption to the withdrawals on maturity. Hence, now there is Exemption at the time of Investment, Exemption at the time of accretion and Exemption at the time of Withdrawal in line with EPF and PPF.
  3. Low Cost: NPS is one of the lowest cost pension scheme in the world. The total recurring expenses inclusive of the Fund Management fee and all other handling and administrative charges would work out to be around to 0.26% p.a. The Lower Expense ratio would lead to HIGHER RETIREMENT CORPUS.
  4. Flexible: Subscribers have freedom to choose and change the
    • i) Pension Fund Managers (PFMs),
    • ii) Investment Pattern/Mix,
    • iii) Point of Presence (PoP),
    • iv) Central Recordkeeping Agency (CRA),
    • v) They also have a choice of Life Cycle Fund.
  5. Portable: NPS account can be transferred across employment, location/geography.
  6. Optimum returns: Attractive Market linked returns based on investment choice made by the subscriber/employer.
  7. Well Regulated: NPS is regulated by PFRDA, with transparent investment norms, regular monitoring and performance review of fund managers by NPS Trust/PFRDA.

NPS offers Triple Tax benefits which can be summarised as under:

Tax benefits for Salaried Individual Tax Benefits for Self Employed Individual
You may invest upto 10% of your basic salary + dearness allowance and claim tax exemption on the invested amount under section 80CCD(1). This tax exemption is subject to a limit of Rs.1,50,000 under Section 80C of Income Tax Act, 1961. You may invest upto 20% of your gross annual income and claim tax exemption on the invested amount under section 80CCD(1). This tax exemption is subject to a limit of Rs.1,50,000 under Section 80C of Income Tax Act, 1961
You can claim additional tax exemption on investment up to Rs.50,000 in NPS under sub-section 80CCD(1B). This benefit is over and above the limit of Rs.1,50,000 under section 80C. This is an exclusive tax deduction available for investment in NPS only. You can claim additional tax exemption on investment up to Rs.50,000 in NPS under sub-section 80CCD(1B). This benefit is over and above the limit of Rs.1,50,000 under section 80C. This is an exclusive tax deduction available for investment in NPS only.
You can also avail Tax deduction on Employer’s Contribution to NPS upto 10 % of salary (Basic + DA), under Section 80 CCD(2)*. It has no upper cap on the amount. _______
*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 by the Employer towards NPS, Recognized Provident Fund and Approved Superannuation Fund.

You can enroll in NPS either in Offline Mode i.e. by filling Physical Application Forms or Online Mode through the link given in our website under the heading “Join NPS”

Through Offline Mode

If you are an Indian Citizen (Resident/Non Resident) between the age of 18 years to 70 years, you can contact any of our branch offices and ask for NPS Applications Forms and additional information about NPS.

You will be required to undergo the following steps:

  1. Fill up the NPS Application form with Black INK (NPS Application Form) and deposit the same in our office.
  2. Documents to be attached along with the NPS Application Form
    • (i) Affix one colour passport photograph (Size 3.5 cm X 2.5 cm) on the NPS Application Form
    • (ii) Proof of Address (AADHAR Card/ Bank Passbook with photo on it/ Voter ID/ Passport etc.)
    • (iii) Identity Proof (PAN Card/ Driving Licence/ Passport etc\.)
    • (iv) Cheque drawn in FAVOUR of "UTI RSL Collection Account - NPS Trust"
    • (v) A cancelled cheque leaf with name preprinted on it.
Through Online Mode:

Please use the link given in our website under the heading “Join NPS”

NPS is far superior to other perceived Retirement plans in many ways. The same can be summarized as under:

The subscriber can exit from NPS and withdraw the accumulated pension wealth in the following manner. No other exits or withdrawals are permitted:

For subscribers joining between 18-70 years:
  1. Partial Withdrawal - Tax-free partial withdrawals up to 25% of self contribution are allowed after 3 years of operation of NPS Account. One can withdraw upto a maximum of 3 times during his/her entire tenure in NPS for specific reasons viz illness, disability, education or marriage of children, purchasing property, starting a new venture.
  2. Premature Withdrawal - Exit from NPS before attainment of age of 60 years (irrespective of cause): At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension of the subscriber and the balance (20%) can be withdrawn as a lump sum by the subscriber. If the total corpus is not exceeding Rs. 2.5 lac, then the subscriber has the option to withdraw the whole corpus in lumpsum. Subscriber can exit from NPS only after completion of minimum 5 years in NPS.
  3. Normal Withdrawal - (Upon attainment of age of 60 years or Superannuation): At least 40% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension of the subscriber and the balance (60%) can be withdrawn as a lump sum by the subscriber. If the total corpus is not exceeding Rs. 5 lacs, then the subscriber has the option to withdraw the whole corpus in lumpsum.
  4. Exit due to the death of the subscriber: 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.
For subscribers joining between 60-70 years:

The exit conditions for subscribers joining the NPS beyond the age of 60 years in the NPS –Private Sector will be as under:

  1. Normal Withdrawal : After completion of 03 years, subscriber can withdraw maximum 60% of the corpus as lumpsum and minimum 40% of the corpus has to be utilized for purchasing an annuity plan for receiving the pension. If the accumulated corpus is less than Rs 5 lakhs, the entire corpus is paid as lumpsum to the subscriber.
  2. Premature Withdrawal : Any exit before completion of 3 years will be treated as premature exit. In such case, the subscriber will be required to annuitize at least 80% of the corpus for purchase of annuity and the remaining corpus can be withdrawn in lump sum. In case the accumulated corpus at the time of exit is equal to or less than Rs. 2.5 lac, the entire corpus is paid as lumpsum to the subscriber.
  3. Exit due to the death of the subscriber : 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.

When you attain 60 Years of age, a Retirement corpus will be formed out of your contributions and returns generated on the same. You will have to buy an annuity with a minimum of 40% of the Retirement Corpus generated from the Annuity Service Providers enrolled under NPS which will give you a monthly pension for whole of your life span. You have the freedom of annuitizing the whole of the Retirement Corpus or any percentage over and above 40% as you deem fit. The rest of the amount can be withdrawn.

The quantum of Pension is not fixed. It will depend upon the volume of your contribution, the returns generated over the tenure of the scheme, the percentage of your corpus utilized for buying annuity and the prevalent rate of returns at the time of buying annuity.

Under NPS, there are two types of accounts – Tier I & Tier II.

Tier-I is Non-withdrawable Individual Pension Account. It is the default pension account having all the tax incentives under Income Tax Act. Withdrawals from Tier I Account i.e. Pension Account before the age of superannuation is possible only in special circumstances and that too at the maximum of 25% of Self Contribution.

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. The PRAN number for both the accounts will remain the same.

A comparison between the two are as under:

Tier – I Tier - II
Individual Pension Account Optional Account – Require an active Tier – I
Exit/withdrawal as per rules/regulations only Unrestricted Withdrawals
Min. Contribution Rs.500/- Minimum Contribution to open Rs.1000/-
Min. Contribution per Year Rs.1000/- Min. Contribution per Year Rs.250/-
Tax benefits are available No tax benefits on contribution/gains
Any Citizen aged between 18-70 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

Types of Schemes available under NPS for the subscribers, can be divided into two Parts.

  • i) Schemes available for Government Sector Employees
  • ii) If only Withdrawal is deferred, it can be deferred till the age of 75 years.
Schemes available for Government Sector Employees with effect from 1st April, 2019
  1. Default Choice : For Government Sector Employees, the default choice has an asset allocation pattern of up to 15% in Equity and the rest in Debt Securities. The detailed Asset allocation pattern for this default choice is as under:

    Asset Class Cap on Investment
    Government Securities & Related Investments Upto 55%
    Debt Instruments & Related Investments Upto 45%
    Equity & Related investments Upto 15%
    Asset Backed, Trust Structured etc. Upto 5%
    Short Term Debt Instruments i.e. money market instruments Upto 10%

    This Asset Allocation Pattern is also applicable to Corporate CG Scheme, NPS Lite Scheme i.e. NPS Swavalamban Yojana and Atal Pension Yojana (APY)

    In addition to the above, the Government Employees have been given two more choices of Investment Pattern w.e.f. 01st April, 2019 and they are:

  2. 100% Government Securities Scheme (Scheme G) : Government Employees who prefer a fixed return with minimum amount of Risk are given an option to invest 100% of their funds in Government Securities i.e. Scheme G
  3. Government Employees who prefer higher returns are given the option of choosing any one of the two Life Cycle based schemes i.e. Conservative Life Cycle Fund with maximum exposure of Equity capped at 25% (LC-25) OR Moderate Life Cycle Fund with maximum exposure of equity capped at 50% (LC 50).

    Further, the Central Government Employees NPS Subscribers have been given yet another choice from 17th August, 2020 and that is NPS Tier II Tax Savings Scheme (NPS-TTS) – Optional A/C with 80 C benefits.

    This NPS-TTS is a composite scheme with the following investment limits:

    Asset Class Limits
    Equity 10% - 25%
    Debt 0% - 90%
    Cash/Money Market/Liquid MFs 0% - 5%

    This Scheme will have a lock in period of 3 years from the date of unitization of contributions by CRA. Further details of the scheme may be accessed from the official website of Pension Fund Regulatory & Authority and NPS Trust i.e. www.pfrda.org.in and www.npstrust.org.in.

    Schemes Available to Subscribers under Private Sector (All Citizens Model)

    Under Private Sector, the subscribers have two choices; Active Choice and Auto Choice The Active Choice offers flexibility to subscribers to decide the asset allocation between the 4 asset classes namely Equity (E), Corporate Bonds (C), Government Securities (G) and Alternate Assets (A). The subscribers can choose their asset allocation pattern subject to the following limits under Active Choice.

    (A). The subscribers can choose their asset allocation pattern subject to the following limits under Active Choice.

    Asset Class Max Exposure Limit
    Equity ( E ) Up to 75%
    Corporate Bonds ( C ) Up to 100%
    Government Securities ( G ) Up to 100%
    Alternate Assets ( A ) Up to 5%
    They also have the freedom to change their asset allocation pattern 4 times in a year.

    The subscribers who do not want to choose their asset allocation pattern, can go for Auto Choice where they have choice of three Life Cycle Funds vis a vis Aggressive Life Cycle Fund (LC-75), Moderate Life Cycle Fund (LC-50) and Conservative Life Cycle Fund (LC-25). The asset allocation pattern under these Life Cycle Funds keeps on changing based on their age. The Asset allocation pattern under these Life Cycle Funds are as under:

    Asset Allocation Pattern under Auto Choice

    Even under Auto Choice, if the subscriber does not make any choice between Life Cycle Funds then the asset allocation would be as per the Moderate Life Cycle Fund (LC-50). Further details of the same may be accessed from the official website of Pension Fund Regulatory & Development Authority and NPS Trust i.e.www.pfrda.org.in and www.npstrust.org.in.

    The funds are invested in accordance with PFRDA guidelines and the Investment Prudential Norms laid down by the Board of Directors of the company with the objective of optimizing returns.

For the detailed Frequently Asked Questions (FAQs) along with their answers, please click on the link. Detailed FAQ