National Pension System (All Citizens Model - Individual / Corporate)
National Pension System (NPS) is a pension cum investment scheme launched by Government of India to provide old age security to Citizens of India. It brings an attractive long term saving avenue to effectively plan your retirement through safe and regulated market-based return. The Scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA). National Pension System Trust (NPST) established by PFRDA is the registered owner of all assets under NPS.
How NPS Works?
Under the NPS, an individual’s savings are pooled in a pension fund.
These funds are invested by Pension Fund Regulatory and Development Authority (PFRDA) regulated by professional fund managers as per the approved investment guidelines in the diversified portfolios comprising of government bonds, bills, corporate debentures and shares.
These contributions would grow and accumulate over the years, depending on the returns earned on the investment made.
At the time of a normal exit from NPS, the subscribers may use the accumulated pension wealth under the scheme either to purchase a life annuity from a PFRDA empanelled life insurance company or withdraw a part of the accumulated pension wealth as lump-sum, if they choose to do so.
Salient Features of National Pension System (NPS)
Every individual subscriber is issued a Permanent Retirement Account Number (PRAN) Card which has a 12 digit unique number.
It is prudentially regulated: Transparent investment norms, regular monitoring and performance review of Fund Managers by NPS Trust.
Low Cost: NPS is perhaps the world’s lowest cost pension scheme. Other handling and administrative charges are also the lowest. The fund management fees will be as charged by the PFM.
Ensures Complete Portability: NPS account can be operated from anywhere in the country irrespective of employment and geography.
Flexibility: Choice of investment mix and Pension Fund managers or select Auto Option (lifecycle fund) to get better returns if option provided by the corporate.
Simple and Web-enabled / Online: All transactions can be tracked online through the CRA system. Subscribers can check fund and contribution status through CRA website.
Benefits to the Subscriber
Cheapest investment product with better growth options through long-term market-linked saving.
Provides a choice of various funds with a flexible investment pattern.
Individual Retirement Account for record keeping at individual level ensures portability across geographies and employment.
Platform to monitor and manage investment to meet the subscriber’s diverse financial goals.
Offers Tier II account which is a voluntary savings facility with anytime liquidity/withdrawal option.
Efficient grievance management through CRA Website, Call Centre, E-mail or Postal Mail.
Routine / quarterly disclosure of the funds helps subscriber to achieve better fund management.
Auto Choice option for those who do not have the required knowledge to manage their investment.
Release of daily NAV by Pension Fund Managers to ensure subscriber can make informed decisions.
An option to remain invested even after your retirement.
Eligibility Criteria for Subscriber to join under all citizens module
Applicable to all citizen of India, whether resident or non-resident (NRI) can join NPS, subject to the following conditions:
Users should have age between 18 – 65 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).
Users should comply with the Know Your Customer (KYC) norms as detailed in the Subscriber Registration Form.
The following applicants cannot join NPS
Individuals of unsound mind
Pre-existing account holders under NPS
Types of Accounts under NPS
Tier-I account: This is the non-withdrawable permanent retirement account into which the accumulations are deposited and invested as per the option of the subscriber.
Tier-II account: This is a voluntary withdrawable account which is allowed only when there is an active Tier I account in the name of the subscriber / customer. The withdrawals are permitted from this account as per the needs of the subscriber as and when claimed.
For Tier I & II Account:
|For All citizens model||Tier I||Tier II|
|Contribution at the time of Account opening||Minimum of Rs. 500||Minimum of Rs. 1,000|
|Contribution per year||Minimum of Rs. 1,000||No minimum contribution requirement & No Cap for maximum contribution for the financial year|
|Minimum amount for further contribution||Rs. 500/-||Rs. 250/-|
|Minimum total contribution in the year||Rs. 1,000/-||Not Applicable|
|Minimum Account Balance to be maintained in a financial year||Rs. 1,000||NIL|
|Minimum frequency of contributions||No frequency. At least one contribution needs to be updated in a Financial Year||No frequency. At least one contribution needs to be updated in a Financial Year|
|Charges & Penalty||Rs. 100/- per year of default||NIL|
(A) Selection of Pension Fund Managers (PFM):
The subscriber can select any one of the following Pension Fund Managers:
HDFC Pension Management Company Limited.
ICICI Prudential Pension Funds Management Company Limited.
Kotak Mahindra Pension Fund Limited.
LIC Pension Fund Limited.
Reliance Capital Pension Fund Limited.
SBI Pension Funds Private Limited.
UTI Retirement Solutions Limited.
Birla Sunlife Pension Management Limited.
(B) Investment Choice for Asset Allocation:
Subscribers can have any of the two choices for their asset allocation:
Active Choice: Corporate/ Subscriber as the case may be will have the option to actively decide as to how your NPS pension wealth is to be invested across Asset class E (up to 50%), Asset Class C, and Asset Class G, Asset Class A.
Auto Choice: In this option, the investments will be made in a life-cycle fund. Here, the fraction of funds invested across three asset classes will be determined by a pre-defined portfolio (which would change as per age of subscriber).
Asset Class E- Investment in predominantly equity market instrument
Asset Class C-Investment in fixed income instruments other than Government Securities
Asset Class G- Investment in Government Securities
Asset Class A – Alternative Investments
Please refer to the Annexure for a percentage of allocation of invest amount for the above Asset classes under Lifecycle investment Option.
Subscriber Enrolment / Registration under Offline mode
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 the branch (POP-SP). For only Tier II account, an individual with an active Tier I account needs to approach the associated branch 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). Branch has to provide a Receipt no. (as an acknowledgement) to the Subscriber.
For Non-Resident Indians (NRI’s): NRI’s can open Tier I account and submit separate application form for subscription in NPS scheme. NRI can give cheque from his / her NRO / NRE account for initial / subsequent subscriptions. NRI’s are not eligible to open Tier II account in NPS scheme.
Remittance of Further Contribution
Subscribers can remit the subscription through cash / cheque and Demand Draft and at any time at our branches and also make payment through online in eNPS website.
Withdrawal of Corpus: Even before the age of 60, a subscriber is allowed to withdraw for certain purposes viz., Housing purpose, Marriages, Medical expenses, etc., as mentioned in the Govt. Notification dated 11.05.2015 under PFRDA (Exits and Withdrawals Under the National Pension System) Regulations 2015.
At any time before attaining 60 years of age (or) after 10 years from the date of generation of PRAN
Subscribers have an option to withdraw up to 20% of the corpus lump sum.
80% or the balance of the corpus should be utilized to purchase a life annuity from any Annuity Service Provider appointed by PFRDA for payment of monthly pension.
In case the total accumulated corpus is less than Rs. 1 Lakh, the subscriber may opt for 100% lump sum withdrawal.
On attaining the age of 60 years and up to 70 years of age
Subscribers have an option to withdraw a maximum of 60% of the corpus as the lump sum.
40% or the balance of the corpus should be utilized to purchase a life annuity from any Annuity Service Provider appointed by PFRDA for payment of monthly pension.
In case the total accumulated corpus is less than Rs. 2 Lakhs, the subscriber may opt for 100% lump sum withdrawal.
Subscribers can withdraw in a phased manner from the age of 60 to till the age of 70, subject to a minimum 10% of the corpus every year.
Any amount lying in PRAN account at the age of 70 should be compulsorily withdrawn as lump sum.
Partial withdrawal up to 25% of own contribution made by him (excluding the contribution from the employer) is allowed subject to be in National Pension System at least for a period of 3 years for availing the benefit. He / She can avail this benefit for the below-mentioned purposes only:
Child higher education or marriage
Construction / purchase of the first house
For treatment of 13 specified illnesses
Any accidents or diseases of life-threatening nature and any other critical illness of life threating nature as stipulated in the guidelines or notifications issued by the authority for self, spouse, children and dependent parents.
Contribution means only the principal amount, i.e. subscription amount (and not the returns on that corpus). Maximum three withdrawals are allowed with a minimum gap of 5 years between each withdrawal. The restriction on a gap between withdrawals is not applicable in case of specified illnesses.
Specified illnesses are cancer, kidney failure (end state renal failure, primary pulmonary arterial hypertension, multiple sclerosis, major organ transplant, coronary artery bypass graft, aorta graft surgery, heart valve surgery, stroke, myocardial infarction, coma, total blindness and paralysis.
Death due to any cause
Nominees can receive 100 % of the NPS pension wealth in a 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.
Tier-I account:Amount invested under this category is exempted from Income Tax under section 80 C of Income Tax Act / Rules up to Rs. 1,50,000/-. Apart from this, additional amount invested under this category is exempted from Income Tax under section 80 CCD (1B) of Income Tax Act / Rules upto Rs. 50,000/-.
Tier-II account:Income Tax Exemption is not available in this category.
FEATURES UNDER CORPORATE SECTOR
The features applicable under All Citizens of India are available under the corporate sector. In addition to these features, a corporate / subscribers under the corporate sector can opt for the following:
NPS provides platform for corporate to co-contribute for its subscribers or facilitate them to contribute for their pension. There are three variations of contributions from employer and employee:
- Equal contributions by employer and employee.
- Unequal contribution by the employer and the employee.
- Contribution from either the employer or the employee.
A Corporate subscriber can also voluntarily contribute in their Tier I through their associated POP. However, contribution in Tier II account can be done through any POP.
Scheme setup option
In NPS, a corporate would have the flexibility to decide investment choice either at subscriber level or at the corporate level centrally for all its underlying subscribers. A corporate can also select a PFM at a corporate level and allow the underlying subscriber to decide the allocation of funds among the three asset classes viz: Equity, Corporate Debt and Government Security.
A corporate subscriber can open both Tier I and Tier II account simultaneously at the time of initial registration or can activate Tier II account subsequently through the associated POP. The investment option for the Tier-II account needs to be exercised by the subscriber, which can be different from Tier-I account.
Tax Benefits to Corporates
10% of the salary (basic and dearness allowance) of employers Contribution can be deducted as “Business Expense” from their Profit & Loss Account.
Tax benefit to Subscriber
The employer’s Contribution to NPS up to 10% of basic plus DA is allowed deduction under section 80CCD(2) and excluded from the limit of Rs. 1.5 Lakh.
Employee confirmation under eNPS by corporates
- Login to CRA system.
- Enter user id and password.
- Go to “Subscriber Registration” menu and navigate “Corporate Employee Confirmation”.
- Search records to be verified through PRAN, Acknowledgment No. or Date Range.
- Verify of subscriber details.
- Accept / Reject the registration / association of PRAN.
- Confirmation is displayed post successful acceptance of the subscriber as an employee.
For details, please refer the Standard Operating Procedure on Employee confirmation under eNPS-Corporate sector.
Additional facilities available to corporates through login to CRA
Transaction Statement Details View of mapped subscribers
- Login to the CRA system using password-based user ids https://cra-nsdl.com/CRA/.
- Navigate “Views > Statement of Transaction-New” Menu.
- Enter PRAN and Submit.
- Select Financial year for which Transaction Statement is to be viewed and Submit.
- Quarter-wise and Tier wise Transaction Statement can also be viewed.
Subscriber List Download
- Login to the CRA system using password-based user ids https://cra-nsdl.com/CRA/.
- Navigate “Views > Subscriber-POP-SP List” Menu.
- Enter CBO registration number and click on download.
- The download will contain details such as PRAN, Subscriber Name and Date of Birth of subscribers associated with the Corporate.
Subscriber shifting by corporates: Two step process
Required details to carry out subscriber shifting request:
- Tier Type
- Target CBO registration number
- CBO details
- Scheme Preference Type
- Subscriber Employment details i.e. Date of Joining, Date of Retirement and Employee id.
Capturing the shifting request (Maker Activity):
- Login to the CRA system using password based user ids https://cra-nsdl.com/CRA/.
- Navigate “Transaction> Subscriber Shifting” Menu.
- Capture the request.
- Acknowledgement id will be generated after capturing the request.
Authorisation of shifting request (Checker Activity):
- Login to the CRA system using second password based user ids https://cra-nsdl.com/CRA/.
- Navigate “Transaction> Authorise Subscriber Shifting” Menu.
- Select Acknowledgement id and Confirm.