1. What is NPS?
Government of India introduced NPS for Central Government Employees joining services w.e.f 1st Jan 2004. On 1st May 2009, on voluntary basis NPS was made available for all citizens of India. NPS aims at creating enough corpus, to enable subscriber for purchasing Annuity post retirement. NPS account can be operated from anywhere in the country irrespective of employment and geography.
2. Who can subscribe NPS?
NPS – Unorganised Sector (UOS) - Any citizen in the age group of 18-70 years (as on the date of submission of his / her application to the POP-SP (Designated branch) can join NPS except for the government subscribers who are mandatorily covered under NPS.
NPS – Corporate Sector - Any eligible corporate entity may enroll their employees under NPS through POPs as per the existing model available for All Citizens of India. POP-SP will undertake entire data upload as per All Citizen's model.
Contributions from employer and employee can be made either of the following ways:
- Equal contributions by employer and employee.
- Unequal contribution by the employer and the employee.
- Contribution from either the employer or the employee.
3. What is PRAN?
PRAN is the Permanent Retirement Account Number, a 12 digit unique number issued to every individual subscriber under NPS. PRAN card is a document with PRAN, subscriber's name, father's name, photograph and signature. In case lost/stolen, Provision of reprint of PRAN card is there on chargeable basis.
4. What are the two types of account available under NPS?
Tier-I account: Subscriber shall contribute his savings for retirement into Tier-I non-withdrawable account. Subscriber will make first contribution at the time of applying for registration with POP-SP (Designated Branch). The subscriber has option to contribute anytime during the year as per his convenience.q
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Minimum Contribution at the time of account opening
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Rs. 1000
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Minimum amount per contribution
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Rs. 500
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Minimum total contribution in the year
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Rs. 6000
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Minimum no. of contributions
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1 per year
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Tier-II account: Voluntary savings facility. Subscriber will be free to withdraw his savings from this account whenever he wishes. An active Tier I account will be a pre requisite for opening of a Tier II.
- No Account Opening & Account Maintenance Charges by CRA.
- Only transactions are charged by CRA & POPs
- No limit on withdrawals from Tier II account
- Investment Patterns same as Tier I
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Minimum Contribution at the time of account opening
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Rs. 1000
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Minimum amount per contribution
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Rs. 250
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Minimum amount balance at the end of financial year
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Rs. 2000
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Minimum no. of contributions
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1 per year
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5. Who can open a Tier II account?
Any subscriber who has an active Tier I account can activate his / her TIER II account through his / her associated POP-SP (Designated Branch). A subscriber can also open Tier I and Tier II together by filling up a composite application form.
6. What are the different modes of paying contribution?
The subscriber can contribute through the following modes:
- Cash
- Local cheque (post dated cheques acceptable)
- Demand draft
7. What happens if subscriber's contribution is less than Rs. 6000/- in a financial year? What happens if a subscriber stops subscription in a year?
The subscriber will have to bear a default penalty of Rs. 100 per year of default and the account would become dormant. In order to reactivate the account, the subscriber would have to pay the minimum contributions along with the penalty, due for the period of dormancy. The dormant account shall be closed if the account value falls to zero.
8. What is the procedure for registration of subscriber?
Any Individual who wants to get registered as a subscriber in NPS would submit the duly filled form (Composite application form for subscriber registration) with other supporting KYC documents to POP-SP(Designated Branch).
For only Tier II account, an individual with an active Tier I account needs to approach the POP-SP and submit a copy of the PRAN Card along with Tier II activation form (UOS-S10).
A subscriber is required to make the first contribution at the time of applying for registration. (Minimum contribution Rs.500 for Tier I and Rs.1000 for Tier II) with duly filled NCIS (NPS Contribution Instruction Slip).
POP-SP (Designated Branch) has to validate the form and provide a Receipt no.(as acknowledgement) to the Subscriber.
9. What is PRAN Kit?
A PRAN Kit contains PRAN card, subscriber master list and an information booklet is sent to the subscriber's registered address. The T-Pin and I-Pin are sent separately to the registered address. The Subscriber Master List shows all the information as provided by the subscriber in his / her application and accordingly captured in CRA system. A subscriber may verify the correctness of the information submitted for registration by looking at the Subscriber Master List.
10. What is the use of T-PIN?
Subscribers can call at CRA's toll free number 1800- 222- 080 using the T-PIN (Telephonic Personal identification Number).
11. How can a customer check status of PRAN application?
Customer can check the status by accessing CRA website: https://cra-nsdl.com/CRA/ by using the 17 digit receipt number provided by POP-SP or the acknowledgement number allotted by CRA-FC at the time of submission of application forms by POP (Operations Dept). Once the PRAN is generated, an email alert as well as a SMS alert will be sent to the registered email ID and mobile number of the subscriber.
12. How to get the money out of the NPS scheme?
On attaining the Age of 60 years and up to 70 years of age – The customer has to invest minimum 40% of the accumulated savings (pension wealth) to purchase a life annuity from an Annuity Service Provider (an IRDA - regulated life insurance company appointed by PFRDA). The customer can choose to purchase an annuity for an amount greater than 40%.
The remaining pension wealth can either be withdrawn in a lump sum on attaining the age of 60 or in a phased manner, between age 60 and 70, at the option of the subscriber.
Death due to any cause - In such an unfortunate event, option will be available to the nominee to receive 100% of the NPS pension wealth in lump sum. However, if the nominee wishes to continue with the NPS, he/she shall have to subscribe to NPS individually after following due KYC procedure.
13. How can a subscriber exit from NPS before the age of 60?
In case of exit before 60 years, a subscriber is required to invest at least 80% of the pension wealth to purchase a life annuity from a Annuity Service Provider (an IRDA - regulated life insurance company appointed by PFRDA). Remaining 20% of the pension wealth may be withdrawn as a lump sum.
14. What are the different types of annuity provided by Annuity Service Providers?
- Pension (Annuity) payable for life at a uniform rate to the annuitant only.
- Pension (Annuity) payable for 5, 10, 15 or 20 years certain and thereafter as long as you is alive.
- Pension (Annuity) for life with return of purchase price on death of the annuitant Policyholder). Pension (Annuity) payable for life increasing at a simple rate of 3% p.a.
- Pension (Annuity) for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
- Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
15. Can a NRI open a NPS account?
Yes, an NRI can open a NPS account provided he has a valid correspondence address and a bank account in India.
16. What are the various entities in the NPS architecture?
- NPS Trust - The NPS trust has been constituted for taking care of the assets and funds held under NPS in the interest of the beneficiaries (subscribers).
- Pension Fund Regulatory and Development Authority (PFRDA) – Regulator of NPS.
- Central Record-keeping Agency (CRA) – Lies with NSDL for record keeping functions.
- CRA FC – CRA Facilitation Center is the entity appointed by NSDL to provide services to the POPs and POP-SPs.
- Pension Funds (PFs)/Pension Fund Managers- Seven Pension Fund Managers manage the fund. (HDFC Pension Management Company, ICICI Prudential Pension Funds Management Company, Kotak Mahindra Pension Fund, LIC Pension Fund, Reliance Capital Pension Fund, SBI Pension Fund, UTI Retirement Solutions)
- Annuity Service Provider (ASP) - Responsible for delivering a regular monthly pension to the subscriber after he/she exit from the NPS. (LIC,SBI LIFE INSURANCE,ICICI PRUDENTIAL LIFE INSURANCE,BAJAJ ALLIANZ LIFE INSURANCE,STAR UNION Dai-ichi LIFE INSURANCE,RELIANCE LIFE INSURANCE)
- Trust & Trustee Bank (TB) - AXIS BANK as Trustee Bank w.e.f July 1 2013. Earlier it was Bank of India.
- Points of Presence (PoP) - POPs are different financial Institutions who act as the first point of interaction of the NPS subscriber with the NPS architecture.
- Point of Presence Service Provider (PoP SP) –PoP SPs are the authorized branches of the PoP.
17. What is meant by scheme preference?
Scheme Preference is the Pension fund schemes option chosen by the subscriber for investing the pension contribution amount.
The NPS offers two approaches to invest.
1. Active choice - There are Individual Funds (E, C and G Asset classes). In active choice, the Subscriber has to select a Pension Fund Manger and has to mention the ratio of funds to be invested among E, C & G.
• Asset Class E - Investments in predominantly equity market instruments. (Permitted to invest only upto 50%)
• Asset Class C - Investments in fixed income instruments other than Government securities.
• Asset Class G - Investments in Government securities.
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.
For both Tier I and Tier II, the subscriber has been given the flexibility to choose one out of the available Pension Fund Managers(PFMs) and also the percentage in which the selected PFM will invest the funds.
18. What are the income tax benefits and how to avail tax benefit?
Currently NPS has ‘Exempt-Exempt-Taxation' (EET) where
- Investment up to 1.5 Lakh in Tier I account is exempted
- Withdrawal is subject to tax
- There is no exemption on Investments made under Tier II account.
The print out of the Statement of Transaction (SOT) could be used as a document for claiming Tax benefit.
19. Can a subscriber get loan under NPS?
No, at present, a subscriber cannot avail a loan against his / her NPS holdings.
