National Pension System

--Nikita K Hejmadi, AAO, DCSEM

 Features
• NPS is a defined contribution pension scheme ,mandatory for all
employees joining services of Central Government (except Armed Forces)
on or after 1st January 2004.
• Governed by Central Civil Services (Implementation of National Pension
System) Rules, 2021 w.e.f. 30th March, 2021
• Each subscriber’s NPS account is identified through unique 12 digit
Permanent Retirement Account Number (PRAN).
• The PRAN number is allotted by NSDL.
• The total amount (PC+GC) is deposited in the PRAN account at the end of
the month and units allocated as per the NAV i.e. Net Asset Value as on
that date.
• Pension Fund Regulatory and Development Authority (PFRDA) is the
regulatory body.
• AXIS Bank is the current Trustee Bank.
 Types of Accounts
Particulars Tier I Tier II
Eligibility Indian Citizen Must be having
between 18-65 yrs Tier 1 Account

Withdrawal facility available limited Yes

Minimum contribution at the time of a/c opening Rs.500 Rs 1000

Tax Benefit on Contribution Yes No

Taxation on Withdrawal Tax Free upto 60% Included in Taxable
of corpus on income
retirement. 25% in
case of partial
withdrawal.
Registration under NPS
• A Government servant to whom these rules apply, shall, immediately on
joining service submit an application in Common Subscriber Registration
Form 1 along with an option form referred to in rule 10, to the Head of
Office for registration to the National Pension System.
• The Head of Office shall on receipt of the application ensure that the
application is complete in all respects, countersign it indicating the date of
receipt and send it to the PAO within 3 working days of joining of the
Government servant. The Head of Office shall keep a copy of the
application form for record.
• The Pay and Accounts Officer shall process the application received from
the Head of Office and forward it to the Central Recordkeeping Agency
through the online system within three working days from the date of
receipt of the application.
• The Central Recordkeeping Agency shall complete registration process and
allocate a Permanent Retirement Account Number in respect of each
Government servant and forward PRAN kits, which includes the PRAN Card,
to the Subscriber.
 Employee Contribution (PC)
• 10% of Basic+DA
• During leave the contribution depends upon the leave salary payable.
• Contribution may be made by the Subscriber, at his option, during the
period of suspension. The subsistence allowance drawn is taken into
account for emoluments for this purpose.
• No contribution shall be made by the Subscriber during the period for
which no leave salary is payable.
• Contribution shall also be paid during probation.
• The contribution is deducted from the first salary drawn.
 Employer Contribution (GC)
• 14% of Basic+ DA w.e.f 01/04/2019.
• No contribution shall be made by the Government for the period
during which subscriber is not required to make contribution.
• Except where leave is granted to subscriber on medical ground or for
pursuing higher studies considered useful in discharge of his official
duty, during such leave, even if leave salary is not payable,
Government shall make contribution equal to 14% of the notional
emoluments.
• no contribution shall be made by the Government during the period
of suspension where the Subscriber had opted not to pay his
contribution during the said period of suspension.
Interest on delayed deposit of contributions
• In case of delay, due to factors not attributable to the Subscriber, in,-
(i) commencement of monthly contributions on account of delay in registration of
the Subscriber in the National Pension System or
(ii) deduction of monthly contribution from the salary of the Subscriber or crediting
to his Individual Pension Account or
(iii) crediting of the monthly contributions by the Government to the Individual
Pension Account of the Subscriber
• the amount of contribution may be credited to the Individual Pension Account of
the Subscriber along with interest for the delayed period.
• The interest shall be credited to the Individual Pension Account of the employee
within a period of thirty days of the crediting of the amount of contribution.
• The rate of interest for this purpose would be the rate of interest, as decided by
the Government from time to time, for the Public Provident Fund deposits.
 Nomination
• A subscriber, at the time of joining the National Pension System is
required to make a nomination mandatorily
• For the purpose of nomination, the ‘family’ means
• In the case of a male subscriber, his legally wedded wife, his children,
whether married or unmarried, his dependent parents and his
deceased son’s widow and children
• in the case of a female subscriber, her legally wedded husband, her
children, whether married or unmarried, her dependent parents, her
husband’s dependent parents and her deceased son’s widow and
children
• If a subscriber has a family at the time of making a nomination, then
any nomination made by such subscriber in favour of a person not
belonging to his family shall be invalid.
• A fresh nomination shall be made by the subscriber on his marriage
and any nomination made before such marriage shall be deemed to
be invalid.
• If at the time of making a nomination the subscriber has no family,
the nomination may be in favour of any person or persons
• Where the nomination is wholly or partly in favour of a minor, the
subscriber may appoint a major person of his family, to be the
guardian of the minor nominee in the event of the subscriber
predeceasing the nominee and the guardian so appointed.
Option to avail benefits on death or disability.
• Every GS shall submit an option in Form 1 opting for benefits as per NPS
Rules or CCS Pension Rules in the event of his death/disability.
• The option shall be exercised to the Head of Office who will accept the
same after verifying all the facts submitted therein and place it in the
service book.
• A copy of the option shall be forwarded by the Head of Office to the
Central Recordkeeping Agency through the Drawing and Disbursing Officer
and the Pay and Accounts Officer for their record.
• The Pay and Accounts Officer shall also make suitable entry in the online
system indicating the details regarding the option exercised by the
Government servant.
• Form 1 has to be submitted alongwith details of family in Form 2.
• Family shall not have any right to revise the option exercised by the
Subscriber in the event of his death.
• The option exercised may be revised at any number of times by the
Subscriber before his retirement.
• A Subscriber who is discharged on invalidation or disability shall be given
an opportunity to submit a fresh option at the time of such discharge.
Where such Subscriber does not exercise a fresh option or is not in a
position to exercise fresh option at the time of discharge, the option
already exercised by the Subscriber shall become operative.
• In case Subscriber has not exercised option and dies before completion of
15 years service or before 3 years of the notification of these rules, default
option of provisions under CCS (pension) rules is applicable. In all other
cases, default option will be benefits under PFRDA (Exits and Withdrawals
under NPS) regulations, 2015.
• If there is no eligible family member for pension under CCS (pension) rules,
the option (whether exercised or not) becomes invalid and the settlement
would be made under PFRDA Regulations, 2015
 Withdrawals
• As per PFRDA exit rules, the following withdrawal categories are
allowed:
1. Superannuation (60 years)
2. Voluntary retirement ( on completion of 20 years of regular service)
3. Premature exit (Resignation/ Termination/Dismissal, etc)
4. Death
5. Part withdrawal
 Superannuation
• Maximum 60% of the total corpus is paid as lumpsum
• The remaining 40% is to be utilized for purchase of annuity.
• In case of Superannuation, a Subscriber can claim 100% Withdrawal if the total
accumulated corpus is less than Rs. 5 Lakh at the time of Superannuation/attaining age
of 60 years.
• Subscriber can decide to remain invested in NPS (Up to 70 years) or can exit from NPS.
Following options are available to NPS Subscribers:
• Continuation of NPS account: Subscriber can continue to contribute to NPS account
beyond Retirement (Up to 70 years) and avail additional tax benefit on the contribution.
• Deferment of Withdrawal: Subscriber can defer his/her Withdrawal and stay invested in
NPS upto 70 years of age. Subscriber can defer only lump sum Withdrawal, defer only
Annuity or defer both lump sum as well as Annuity. The request for continuation should
be initiated till 15 days before the attainment of retirement age.
• Start your Pension: If Subscriber does not wish to continue/defer NPS account, he/she
can exit from NPS. He/she can initiate exit request online and as per NPS exit guidelines
start receiving pension.
Retirement on completion of twenty years regular
service
• At any time after a Subscriber has completed twenty years' regular service,
he may, by giving notice of not less than three months in writing to the
appointing authority, retire from service.
• Regular service shall mean service commencing from the date of joining of
a post in the Central Government on a regular basis, whether on direct
recruitment or absorption or re-employment basis.
• Periods spent on all kinds of leave (including study leave and extraordinary
leave), deputation or foreign service, duly sanctioned by the competent
authority, shall be treated as regular service for the purpose of this rule.
• Service rendered on casual, ad-hoc or contract basis, before appointment
on regular basis, in the same or another Central Government Department,
a State Government or an autonomous or statutory body, shall not be
treated as regular service for the purpose of this rule.
• This rule shall not apply to a Subscriber who, -
(a) retires under the Special Voluntary retirement Scheme of Department of
Personnel and Training relating to voluntary retirement of surplus
employees.
(b) retires from Government service for being absorbed in an autonomous
body or a public sector undertaking.
• The notice of voluntary retirement shall require acceptance by the
appointing authority.
• Provided that where the appointing authority does not refuse to grant the
permission for retirement before the expiry of the period specified in the
said notice, the retirement shall become effective from the date of expiry
of the said period.
• The Subscriber, on voluntary retirement from service, shall be entitled to
benefits admissible under the Pension Fund Regulatory and Development
Authority (Exits and Withdrawals under National Pension System)
Regulations, 2015 to the Subscriber retiring on superannuation.
 Premature Exit
• 80% of the accumulated corpus will be utilized for purchase of annuity.
• 20% will be paid in lumpsum
• In case of Pre-mature Exit, if the total accumulated corpus is less than Rs.
2.5 Lakh, the Subscriber can avail the option of complete Withdrawal.
• In case of pre mature exit, Annuity starts immediately, if Subscriber fulfills
the Age and Corpus criteria for purchasing Annuity (depending upon choice
of ASP and Annuity scheme of the respective Annuity Service Provider).
• Payment of lump sum withdrawal and annuity shall not be made before
the expiry of a period of ninety days from the date on which the
resignation becomes effective and the Subscriber is relieved of his duty.
• Such person may, at his option, continue to subscribe to the National
Pension System with the same Permanent Retirement Account Number, as
a non-Government subscriber in accordance with the regulations notified
by the Authority.
• Where with proper permission, the resignation has been submitted to take up
another appointment, whether temporary or permanent, in the same or any
other Department of the Central Government or the State Government and the
employees of such Department are covered by the National Pension System, the
Subscriber shall continue to subscribe to the National Pension System with the
same Permanent Retirement Account Number on the new appointment and shall
be deemed to be a member of the National Pension System from the date he
joined the Government service on a post to which he was first appointed.
• In cases where the employees of such Department or State Government are not
covered by the National Pension System, the Subscriber shall be eligible to
receive benefits under National Pension System in accordance with the Pension
Fund Regulatory and Development Authority ( Exits and Withdrawals under
National Pension System)Regulations, 2015 as admissible in the case of exit of
Subscriber on superannuation.
• Provided further that where the employees of such Department or State
Government are not covered by the National Pension System, such subscriber
may, at his option, continue to subscribe to the National Pension System with the
same Permanent Retirement Account Number as a non-Government subscriber,
in accordance with the regulations notified by the Authority, in this regard.
 Retirement on invalidation
• In case of a Subscriber acquiring a disability intends to retire from the
service on account of any bodily or mental infirmity which permanently
incapacitates him for the service, he may apply to the Head of Department
for benefits on retirement on invalidation.
• The application can be made by the spouse or any other family member in
case the Subscriber himself is not in a position to submit such application
on account of the bodily or mental infirmity.
• The Head of Office or the Head of Department shall, within fifteen days of
the receipt of such application, request the concerned authority for
examination of the Subscriber within thirty days of receipt of such request,
by the following medical authority, -
(a) a Medical Board in the case of a Gazetted Government servant and of a
non-Gazetted Government servant whose pay exceeds fifty- four thousand
rupees p.m.
(b) Civil Surgeon or a District Medical Officer or Medical Officer of
equivalent status in other cases.
• The medical authority shall also be supplied by the Head of the Office
details of age of Subscriber as per official records.
• The medical authority shall examine the Subscriber to ascertain
whether or not the Subscriber is fit for further service or whether he
is fit for further service of less laborious character than that which he
had been doing.
• No medical certificate of incapacity for service may be granted unless
the medical authority has received a request from the Head of his
Office or Head of Department for medical examination of the
Subscriber.
• If the Subscriber, has been found to be fit for further service of less
laborious character than that which he had been doing, he shall,
provided he is willing to be so employed, be employed on lower post
and if there be no means of employing him even on a lower post, he
may be granted benefits on retirement on invalidation.
• The subscriber has an option to opt for benefits under CCS Pension
Rules or under PFRDA (exits and withdrawals under NPS) regulations.
• In case the subscriber opts for benefits under CCS Pension Rules, the
GC and returns earned thereon will be transferred to the Govt
account and remaining accumulated pension corpus will be paid back
to the subscriber.
• In case of opting for benefits under NPS, the subscriber has the
option to continue his Individual Pension account or defer payment of
benefits beyond the date of retirement or avail benefits in accordance
with the PFRDA(Exits and Withdrawals under NPS) Regulations, 2015
as admissible in the case of exit of a Subscriber on superannuation.
 Compulsory retirement/Dismissal
• Where a Subscriber, is compulsorily retired from service as a penalty or is
dismissed or removed from Government service, the lump sum and the
annuity out of his accumulated pension corpus shall be paid to him in
accordance with the regulations notified by the Authority payable to the
Subscriber as admissible in the case of exit of a Subscriber from the
National Pension System before superannuation.
• The Subscriber, at his option, may continue to subscribe to the National
Pension System with the same Permanent Retirement Account Number as
a non-Government subscriber, in accordance with the regulations notified
by the Authority.
• The above shall be without prejudice to any action being taken in such
cases in respect of gratuity and other retirement benefits not covered by
these rules and those benefits shall be regulated in accordance with the
rules as applicable to such benefits.
 Effect of departmental or judicial proceedings
pending on retirement.
• Departmental or judicial proceedings, which were instituted while the
Subscriber was in service but are not concluded before retirement or the
judicial proceedings instituted after retirement of the Subscriber, shall not
affect the benefits payable to the Subscriber out of his accumulated
pension corpus
• The lump sum and the annuity out of his accumulated pension corpus shall
be paid to him in accordance with the regulations notified by the Authority
as admissible in the case of exit of a Subscriber from the National Pension
System on superannuation.
• The above shall be without prejudice to any action being taken in such
cases in respect of gratuity and other retirement benefits not covered by
these rules and those benefits shall be regulated in accordance with the
rules as applicable to such benefits.
 Death
• If the default option/option exercised by subscriber is CCS (Pension) Rules,
then the family/nominee has to give NOC for transferring the Employer
contribution and returns on the same to the Government account.
• A Declaration from nominee/legal heir mentioning that nominee/legal heir
will not get NPS benefits is also required to be submitted.
• The remaining accumulated pension corpus will be paid to the nominee
made under the PFRDA, 2015 rules. If no nomination is made or the
nomination does not subsists, the amount will be paid to the legal heirs.
• In case, default option/option exercised by the subscriber is for availing
benefits under NPS Rules, 80% of the corpus will be utilized for purchase of
default annuity scheme and 20% will be paid in lumpsum to the nominees.
• In case, the total corpus in the NPS account is less than or equal to
Rs. 5 lakh as on the Date of Death of the Subscriber, the nominees or legal
heirs as the case may be, shall have the option of complete (100%)
Withdrawal.
 Annuity scheme
• At present 13 ASPs are providing the Annuity services to the NPS
Subscribers. Some are as follows:
• Life Insurance Corporation of India
• SBI Life Insurance Co. Ltd.
• ICICI Prudential Life Insurance Co. Ltd.
• HDFC Standard Life Insurance Co Ltd
• Star Union Dai-ichi Life Insurance Co. Ltd.
• [Link]
• In case of Superannuation & Pre-mature Exit, Subscriber can purchase any
one scheme which are available with respective Annuity Service Provider.
However, In case of death, Spouse has to purchase Default Annuity
Scheme.
• Following schemes are available with ASPs:
• Annuity for life - On death of the annuitant, payment of Annuity ceases.
• Annuity for life with return of purchase price on death - On deathof the
annuitant, payment of Annuity ceases and the purchase price isreturned to
the nominee
• Annuity payable for life with 100% Annuity payable to spouse ondeath of
annuitant - On death of the annuitant, Annuity is paid to thespouse during
his/her life time. If the spouse predeceases the annuitant,payment of
Annuity will cease after the death of the annuitant.
• Annuity payable for life with 100% Annuity payable to spouse ondeath of
annuitant with return on purchase of Annuity - On death ofthe annuitant,
Annuity is paid to the spouse during his/her life time andpurchase price is
returned to the nominee after the death of the spouse.
• Default Annuity Scheme (Applicable in case of Government
SectorSubscribers only)
 Default Annuity scheme
• Default Annuity Scheme shall provide for Annuity for life of the Subscriber
and his or her spouse (if any) with provision for return of purchase price of
the Annuity and upon the demise of such Subscriber, the Annuity be re-
issued to the family members in the order specified hereunder at a
premium rate prevalent at the time of purchase of such Annuity by utilizing
the purchase price required to be returned under the Annuity contract
(until all the family members in the order specified below are covered):
• Living dependent mother of the deceased Subscriber;
• Living dependent father of the deceased Subscriber.
• After the coverage of all the family members specified above, the purchase
price shall be returned to the surviving children of the Subscriber and in
the absence of children, the legal heirs of the Subscriber, as may be
applicable.
 Forms
Mode of retirement or exit. Form of covering letter.
Superannuation or Voluntary Retirement or Premature Form 4-A.
retirement under
rule 56(j) of Fundamental Rules
Technical Resignation or Absorption in an autonomous Form 4-B.
body or Public
Sector Undertaking.
Resignation or Compulsory Retirement as a measure of Form 4-C.
penalty or
Dismissal or Removal from service.
Retirement on Invalidation or Disablement. Form 4-D.

Death during service. Form 4-E.

 Partial Withdrawal
• Following are the conditions of Conditional Withdrawal:
• Subscriber should be in NPS system for 3 years
• Withdrawal amount will not exceed 25% of the contributions made by the Subscriber
• Withdrawal is allowed only against the specified reasons-
• Higher education of children
• Marriage of children
• For the purchase/construction of residential house or flat in his or her own name or in a joint
name with his or her legally wedded spouse. In case, the Subscriber already owns either
individually or in the joint name a residential house or flat, other than ancestral property, no
Withdrawal under these regulations shall be permitted.
• For treatment of specified illnesses - suffered by Subscriber, his legally wedded spouse, children
including a legally adopted child and dependent parents.
• To meet medical and incidental expenses arising out of the disability or incapacitation suffered by
the Subscriber
• For Skill development/re-skilling or any other self-development activities
• Withdrawal can happen maximum of three times during the entire tenure of
subscription.
 Scheme Preference & Investment Option in Tier I
Account
As per Ministry of Finance Gazette Notification dated January 31, 2019,
the Central Government Subscribers, from April 1, 2019, will have the
option of selecting the Pension Funds (PFs) and Investment Pattern in
Tier I account. A Subscriber can choose any one of the available PFs
and Investment Option as per their choice. If the choice is not
exercised by the Subscriber, NPS contributions will be invested in the
existing default scheme for Govt. employees as under:
SBI Pension Funds Pvt. Ltd. (34%)
UTI Retirement Solutions Ltd. (33% )
LIC Pension Fund Ltd. (33%)
• The Subscriber can select any one of the following investment
schemes:
• Scheme G: 100% of contribution will be invested in Government
Bonds and related instruments.
• Scheme LC 25 : It is the Life cycle fund where the Cap to Equity
investments is 25% of the total asset.
• Scheme LC 50 : It is the Life cycle fund where the Cap to Equity
investments is 50% of the total asset.
• Subscriber can change the Pension Fund Manager once in a Financial
Year.
 Submission of claim for benefits under the
National Pension System on superannuation.
• Every Subscriber shall, six months before the date on which he is due to
retire on superannuation, submit to the Head of Office, duly filled
withdrawal Form prescribed by the Authority along with the documents
mentioned in the withdrawal form.
• Where the Subscriber has submitted the claim through online mode, he
shall submit a signed copy of the print-out of the said withdrawal Form
along with the documents mentioned in the withdrawal Form.
• Claim ID generated six months in advance from the date of Superannuation
by NSDL and intimated to subscriber through email, SMS and Letter.
• Once the claim is received, DDO will verify the claim and supporting
documents and authorize the withdrawal claim in the CRA system.
• After authorization by CRA, the funds (60%) are transferred by the Trustee
Bank to the Subscriber and 40% to the Annuity Service Providers.
Following documents are to be obtained along with the completely
filled Withdrawal form for Superannuation & Pre-mature Exit:
• Advanced stamped receipt needs to be duly filled and cross-signed on
the Revenue stamp by the Subscriber.
• KYC documents (address and photo-id proof)
• Cancelled Cheque’ (having Subscriber’s Name, Bank Account Number
and IFS Code) or ‘Bank Certificate’ on Bank Letterhead having
Subscriber’s name, Bank Account Number and IFS Code required to
be submitted as bank proof. ‘Copy of Bank Passbook’ can be
accepted, however, it should have Subscriber’s photograph, Name
and IFS Code on it and should be self-attested by the Subscriber.
• "Request Cum Undertaking" form if eligible for complete Withdrawal.
 Retirement Benefits to NPS Subscribers
1) 60% of NPS Corpus Fund as a lumpsum Payment.
2) Pension as per the Annuity Schemes.
3) Retirement Gratuity
4) Leave Encashment
5) Group Insurance
 Tax benefits
• Amount of Personal contribution under NPS is exempt under 80C
(maximum 1.5 lakh)
• An amount of Rs. 50000/- can be claimed as exemption under 80 CCD
(1B) over and above that under 80C.
• [Link]