NPS Accounts

Under NPS, Subscriber gets the option to open two accounts known as Tier I account and Tier II account. A Tier
I account is mandatory to open in order to join NPS. Tier II account is optional and can be opened at any point
of time – at the time of opening Tier I account or later.

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 Withdrawal from this account can be done at any
years of account opening or attaining the age 60 point of time as per Subscriber’s need
years whichever comes early

Minimum annual contribution required for this NA

account is Rs. 1000

Investment of Funds under NPS

Subscriber gets the choice of 3 funds under NPS – Equity, Corporate Bonds and Government Securities. These
are also known as E, C and G respectively.

Subscriber gets the freedom to decide her own asset mix restricting the exposure to Equity to 50% of
Contribution amount. It is called Active Choice Investment option. Subscriber also gets an option of Life Cycle
Fund is also known as Auto Choice. Under this mode, investment across three funds is done as per the age of
the employee as shown in below chart

Age of the Corporate Government

Equity
Employee Bonds Securities

< = 35 Yrs 50% 30% 20%

36 48% 29% 23%

37 46% 28% 26%

38 44% 27% 29%

39 42% 26% 32%

 40 40% 25% 35%

41 38% 24% 38%

42 36% 23% 41%

43 34% 22% 44%

44 32% 21% 47%

45 30% 20% 50%

46 28% 19% 53%

47 26% 18% 56%

48 24% 17% 59%

49 22% 16% 62%

50 20% 15% 65%

51 18% 14% 68%

52 16% 13% 71%

53 14% 12% 74%

54 12% 11% 77%

> = 55 Yrs 10% 10% 80%

The re-alignment of portfolio under Auto Choice is system driven and is exercised on the date of birth of the
Subscriber.

Following flexibilities are given to Subscribers:

 Subscriber can have different Investment Choice (Auto / Active) for Tier I and Tier II account
 Subscriber can change the Asset Mix and Investment Choice once in a Financial year for both Tier I and Tier II
account

Exit from the Scheme

Subscriber can exit from the Scheme after 10 years of account opening or on attainment of the age 60 years
whichever is early. The payout will be defined as per the exit age of the Subscriber.

Exit before the age 60 years Exit at the age 60 years

 Up to 20% of Corpus can be withdrawn in lump  Up to 60% of Corpus can be withdrawn in lump sum
sum  Balance amount needs to be invested in Annuity
 Balance amount needs to be invested in Annuity

If the Corpus is less than or equal to Rs.1 lakh, If the Corpus is less than or equal to Rs.2 lakhs,
there is no need to invest into Annuity. Entire there is no need to invest into Annuity. Entire
amount can be withdrawn in lump sum amount can be withdrawn in lump sum

Subscriber exiting from NPS at the age of 60 gets following flexibilities

 Subscriber can defer the decision to invest in Annuity for 3 years.

 Subscriber can defer the decision of lump sum withdrawal for 10 years.

 Lump sum amount due for withdrawal at the age 60 can be withdrawn in 10 installments as per the choice of the
Subscriber.

 If Subscriber does not want to exit at the age of 60 years, she can keep on contributing towards NPS till the age
70 years.

Death Benefit

In case of death of the Subscriber the entire Corpus is given to the nominee. In case Subscriber has not opted
for any nominee, the legal heir can claim the amount.

Partial Withdrawal from the Scheme

In the entire life span, 3 partial withdrawals are allowed from Tier I account before attainment of at 60 years as
shown below

 First withdrawal will be after 10 years of account opening

 2nd and 3rd withdrawal would be after a gap of 5 years from the first withdrawal

25% of the Contribution amount will be allowed for specific purposes like Child marriage, Higher education,
Treatment of Critical illnesses, buying home etc.
 Investment in Annuity
As discussed above, on exit from NPS or retirement some portion of Corpus has to be invested into Annuity
scheme to provide monthly pension then after. Entities registered with PFRDA to provide annuity service are
 HDFC Standard Life Insurance Company Limited
 ICICI Prudential Life Insurance Company Limited
 Star Union Dai-ichi Life Insurance Company Limited
 Life Insurance Corporation of India
 SBI Life Insurance Company Limited
Annuity schemes available for NPS subscribers are as mentioned below
Sr.
Name of Annuity Scheme
No
1 Annuity for life
2 Annuity is guaranteed for 5, 10, 15 or 20
years and for life thereafter
3 Annuity for life increasing at simple rate of
3% per annum
4 Annuity for life with return of purchase
price on death
5 Annuity for life with the provision for 50%
of the annuity to the spouse of the
annuitant for life on death of the annuitant
6 Annuity for life with the provision for 100%
of the annuity to the spouse of the
annuitant for life on death of the annuitant
7 Annuity for life with the provision for 100%
of the annuity to the spouse of the
annuitant for life on death of the annuitant,
Description
Annuity / monthly pension are paid during the life
time of Annuitant. On death, the payment of annuity
ceases
Annuity / monthly pension are paid during the life
time of Annuitant
Annuity / monthly pension are paid during the life
time of Annuitant. On death, the payment of annuity
ceases
Annuity / monthly pension are paid during the life
time of Annuitant. On death, purchase price is
returned to the Nominee
Annuity / monthly pension are paid during the life
time of Annuitant. On death of the Annuitant, 50% of
original monthly pension is paid during the life span of
Spouse of the Annuitant. On death of the Spouse, the
payment of annuity ceases
Annuity / monthly pension are paid during the life
time of Annuitant. On death of the Annuitant, monthly
pension is paid during the life span of Spouse of the
Annuitant. On death of the Spouse, the payment of
annuity ceases
Annuity / monthly pension are paid during the life
time of Annuitant. On death of the Annuitant, monthly
pension is paid during the life span of Spouse of the
with return of purchase price on death of Annuitant. On death of the Spouse, purchase price is
the last survivor returned to the Nominee
 Salient Features and Benefits of NPS

NPS offers wide range of benefits to individuals, making it a unique investment opportunity. Some of the salient
features of NPS are

 Portable Account – the NPS account (PRAN) remains the same irrespective of change of employment or
geography.

 Online platform – On joining NPS, each Subscriber gets log in ID and Password of NSDL system for accessing
NPS details online.

 It offers choice of Service Providers, Funds, Investment Options, Pension Fund Manages, Annuity Service
Provides and Annuity Plans to Subscribers

 It offers Subscribers freedom to switch the Service Provider, Fund, Investment Option and Pension Fund
Manager

 Flexible contribution mechanism – Amount and frequency of contribution can be changed as per the
Subscriber requirement

 Prudently regulated - NPS is regulated by PFRDA, with transparent investment norms and regular monitoring
and performance review of fund managers by NPS Trust

 Efficient grievance management through CRA / PFRDA Website, Call Center, Email or Postal Mail

 Transparent investment norms – Investment Portfolio under each asset class can be viewed on respective
Pension Fund Manager’s website.

 Extremely Low Cost of operations – with 0.01% as Fund Management Charge, NPS is one of the World’s
least cost investment options
 NPS Key Stakeholders

NPS has a unbundled architecture where each function is performed by different entities as mentioned below

 Point of Presence – Points of Presence (POPs) are the first points of interaction of the NPS subscriber with the
NPS architecture. The authorized branches of a POP, called Point of Presence Service Providers (POP-SPs), will
act as collection points and extend a number of customer services to NPS subscribers

 Central Recordkeeping Agency – The recordkeeping, administration and customer service functions for all
subscribers of the NPS are being handled by NSDL e-Governance Infrastructure Limited, which is acting as the
Central Record-keeper for the NPS

 Pension Fund Managers – The Pension Funds (PFs) appointed by PFRDA would manage your retirement
savings under the NPS

 Annuity Service Providers – ASPs would be responsible for delivering a regular monthly pension to you after
your exit from the NPS

 Trustee Bank – The Trustee Bank appointed under NPS shall facilitate fund transfers across various entities of
the NPS system viz. PFMs, ASPs, Subscribers, etc. Axis Bank has been appointed as the Trustee Bank

 NPS Trust – The NPS trust has been set up and constituted for taking care of the assets and funds under the
NPS in the interest of the beneficiaries (subscribers)

 PFRDA – An autonomous body set up by the Government of India to develop and regulate the pension market
in India
Save your Income Tax with National Pension System (NPS)

Tax Benefits and Treatment

Tax benefits under Tier I and Tier II Account are as per below table

NPS
Tax Benefit Tax Treatment
Account

Tier I Salaried Individual

 Up to 40% of Corpus withdrawn in
lump sum is exempt from tax
 Investment up to 10% of Salary (Basic + Dearness
Allowance) is deductible from taxable income u/s 80CCD  Balance amount invested in

(1) of Income Tax Act, 1961 subject to 1.5 lakhs limit of Annuity is also fully exempt from

section 80C tax

 Pension received out of

 Additionally, investment up to Rs.50,000 is deductible
investment in Annuity is treated as
from taxable income u/s 80CCD (1B) of Income Tax Act,
income and will be taxed
1961
appropriately

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

Tier II There is no tax benefit on investment towards Tier II NPS Indexation benefit can be claimed
Account
NPS Eligibility

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

1. User should have age between 18 – 60 years as on the date of submission of his/her application to the
Point of Presence (POP) / Point of Presence–Service Provider -Authorized branches of POP for NPS (POP-
SP).

2. User should comply with the Know Your Customer (KYC) norms as detailed in the Subscriber Registration
Form.

The following applicants cannot join NPS:

1. Un-discharged insolvent

2. Individuals of unsound mind

3. Pre-existing account holders under NPS

Charges under NPS

Charges under NPS are defined by the regulator as per below chart. These charges are exclusive of Service Tax.

Frequency of
Intermediary Charge Head Charge Mode of deduction
deduction

PoP Subscriber Rs.125 One time at Deducted from the

Registration the time of initial contribution
Charge registration amount deposited
by Subscriber

Contribution 0.25% of the On each Deducted from the

processing Contribution amount transaction amount deposited
charge subject to minimum by the Subscriber
Rs.20 and maximum
Rs.25,000

Non – Financial Rs.20 On each Collected from

Transaction transaction Subscriber
Processing separately
Charge

CRA (NSDL) NPS Account Rs.40 One time Collected by

opening charge cancelling units on a
quarterly basis

Account Rs.95 Annual

Maintenance
charge

Financial Rs.3.75 On each

transaction transaction
processing
charge

Pension Fund Asset 0.01% Annual Adjusted before

Manager Management NAV publication
Charge

Custodian Asset Servicing 0.0032% Annual

Charge

NPS Trust Trust 0.01% (no Service Tax Annual

Management applicable)
Charge
 FAQs on NPS
About 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

o Subscriber should be between 18 – 60 years of age as on the date of submission of her application

o 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 Withdrawal from this account can be done at any
years of account opening or attaining the age 60 point of time as per Subscriber’s need
years whichever comes early

Minimum annual contribution required for this NA

account is Rs. 1000

 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

o Equities (E)

o Corporate Bonds (C)

o 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

o 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 50% of Contribution amount.
However, in Corporate Bonds and Government Securities Subscriber can invest 100% of Contribution amount

o 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

Age of the Corporate Government

Equity
Employee Bonds Securities

< = 35 Yrs 50% 30% 20%

36 48% 29% 23%

37 46% 28% 26%

38 44% 27% 29%

39 42% 26% 32%

40 40% 25% 35%

41 38% 24% 38%

42 36% 23% 41%

43 34% 22% 44%

44 32% 21% 47%

45 30% 20% 50%

46 28% 19% 53%

47 26% 18% 56%

48 24% 17% 59%

 49 22% 16% 62%

50 20% 15% 65%

51 18% 14% 68%

52 16% 13% 71%

53 14% 12% 74%

54 12% 11% 77%

> = 55 Yrs 10% 10% 80%

 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:

o For Tier I account opening: Rs. 500

o 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?

Subscriber gets the following tax benefits on contributions

NPS Tax Treatment

Tax Benefit
Account on withdrawal

Tier I Salaried Individual

o Up to 40% of Corpus withdrawn in
lump sum is exempt from tax
o Investment up to 10% of Salary (Basic + Dearness
o Balance amount invested in Annuity
Allowance) is deductible from taxable income u/s
is also fully exempt from tax
80CCD (1) of Income Tax Act, 1961 subject to 1.5
lakhs limit of section 80C o Pension received out of investment in
Annuity is treated as income and will
o Additionally, investment up to Rs.50,000 is deductible
be taxed appropriately
from taxable income u/s 80CCD (1B) of Income Tax
 Act, 1961

Self Employed Professionals

o 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

o Additionally, investment up to Rs.50,000 is deductible

from taxable income u/s 80CCD (1B) of Income Tax
Act, 1961

Tier II There is no tax benefit on investment towards Tier II Indexation benefit can be claimed
NPS Account

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 at Retirement age defined by the

Exit before the age 60 years
Corporate

o Up to 20% of Corpus can be withdrawn in lump o Up to 60% of Corpus can be withdrawn in lump sum
sum o Balance amount needs to be invested in Annuity
o Balance amount needs to be invested in Annuity

If the Corpus is less than or equal to Rs.1 lakh, If the Corpus is less than or equal to Rs.2 lakhs,
there is no need to invest into Annuity. Entire there is no need to invest into Annuity. Entire
amount can be withdrawn in lump sum 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)

Frequency of
Intermediary Charge Head Charge Mode of deduction
deduction
 PoP Subscriber Rs.125 One time at Deducted from the
Registration the time of initial contribution
Charge registration amount deposited
by Subscriber

Contribution 0.25% of the On each Deducted from the

processing Contribution amount transaction amount deposited
charge subject to minimum by the Subscriber
Rs.20 and maximum
Rs.25,000

Non – Financial Rs.20 On each Collected from

Transaction transaction Subscriber
Processing separately
Charge

CRA (NSDL) NPS Account Rs.40 One time Collected by

opening charge cancelling units on a
quarterly basis

Account Rs.95 Annual

Maintenance
charge

Financial Rs.3.75 On each

transaction transaction
processing
charge

Pension Fund Asset 0.01% Annual Adjusted before

Manager Management NAV publication
Charge

Custodian Asset Servicing 0.0032% Annual

Charge

NPS Trust Trust 0.01% (no Service Tax Annual

Management applicable)
Charge

*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
 Below types of Corporates are eligible to join NPS and offer
it as one of the employee benefit schemes

 Entities registered under Companies Act

 Entities registered under various Co-operative Acts

 Registered Partnership Firms

 Registered Limited Liability Partnership (LLP) Firms

 Central Public Sector Enterprises

 State Public Sector Enterprises

 Proprietorship Concerns

 Trust / Societies

 Foreign Companies registered u/s 591 to 608 of the Companies Act for having place of business in India

 Anybody incorporated under any act of Parliament or State legislature or by order of Central / State Government
Value Proposition for Corporate

1. No Cost burden

 Corporate can join NPS free of cost

 No cost of setup or maintenance of Self Administered Pension Funds

 No need to form a Trust

 Simple procedure to add or remove employees at any point of time

2. No account related obligation

 Corporate acts merely as facilitator

 The Account maintenance responsibility / obligation remains with the employees only
3. Flexibilities to Corporates

 Can be roll out NPS for all on voluntary basis / for select group of employees

 Corporate can select a Pension Fund Manager, Asset Allocation and Investment option on behalf of
employees

 Corporate can fix the percentage / frequency of contribution

Value Proposition for Employees

1. For senior management

 Offers platform to save tax beyond the 80CCE (1.5L) limit

 Cost effective investment option

2. For middle and junior management

 Offers platform for triple tax benefits

 Cost effective investment option

Tax benefits and Treatment under Corporate NPS

Tax benefits for Employees

Under NPS corporate model employee can deposit contribution directly or she can route the contribution through
the employer she is working with. Both the contributions are eligible for tax deduction as shown below

Type of
Tax Benefit Tax Treatment
Contribution

Contribution
 Investment up to 10% of Salary (Basic + Dearness  Up to 40% of Corpus
deposited by
Allowance) is deductible from taxable income u/s withdrawn in lump sum is
Employee
80CCD (1) of Income Tax Act, 1961 subject to 1.5 exempt from tax
lakhs limit of section 80C  Balance amount invested in
 Additionally, investment up to Rs.50,000 is Annuity is also fully exempt
deductible from taxable income u/s 80CCD (1B) of from tax
Income Tax Act, 1961  Pension received out of
investment in Annuity is
Contribution treated as income and will be
 Investment up to 10% of Salary (Basic + Dearness
routed through taxed appropriately
Allowance) is deductible from taxable income u/s
the Employer
80CCD (2) of Income Tax Act, 1961. There is no
cap in terms of absolute value.

Tax benefit u/s 80CCD (1B) and 80CCD (2) are over and above 1.5 lakhs limit u/s 80C.

Tax benefit for Employer

Corporate can avail of tax benefit u/s 36 (i) (IV) of Income Tax Act, 1961, on the contribution deposited by it.

How 80CCD (1B) and 80CCD (2) work?

Corporate needs to re-structure the salary of the employee as shown below:

Head Particulars Without NPS With NPS

Salary Basic (40% of Gross) 4,000,000 4,000,000

HRA (50% of Basic) 2,000,000 2,000,000

Flexi / Professional Allowance 3,327,600 2,927,600

Corporate Contribution – EPF 480,000 480,000

 Corporate Contribution – Gratuity 192,400 192,400

Corporate Contribution - NPS (10% of Basic) 0 400,000

Gross Salary 10,000,000 10,000,000

Deductions 80CCE 1,50,000 1,50,000

Corporate Contribution – PF 480,000 480,000

Corporate Contribution – Gratuity 192,400 192,400

Corporate Contribution - NPS (80CCD (2)) 0 400,000

Individual Contribution to NPS (80CCD (1B)) 0 50,000

Gross Deductions 672,400 1,122,400

Taxable Salary 9,327,600 8,877,600

Change in Taxable Salary 450,000

Tax Saved @ 30% 135,000

How NPS Corporate model works?

In order to offer NPS to its employee corporate needs to register itself through a POP by submitting Corporate
Registration Form and KYC documents as prescribed by the regulator. POP sends these documents to CRA which
creates a Corporate Registration Number called CHO / CBO number.

Upon receiving the CHO / CBO number, Corporate can implement NPS in the system. POP helps create
awareness about NPS to all the employees and organize NPS helpdesks where employees can deposit individual
NPS registration form and KYC documents for NPS account opening.

Once the NPS account of employee is opened, Corporate can start deducting the contribution from monthly
salary of the employee and sends the same to POP for further processing.