About NPS - National Pension System

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)*. _______
*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:

Parameters <=== Products ===>
NPS MF Pension Products Insurance Pension Products PPF
Tax Deductions
  1. Self-contribution :- Opportunity of Extra Tax Savings under Sec 80 CCD (1B) up to Rs.50,000/- which is in addition to the Sec 80 C Limit
  2. Employer’s Contribution : -Qualifies for Additional Tax Deduction under Section 80 CCD(2) up to 10% of Salary
Only under Sec 80 C Limit Only under Sec 80 C Limit Only under Sec 80 C Limit
Expense Ratio Ranges between 0.25% to 0.26% Ranges between 2% to 2.50% Ranges over 2.50% Government Administered
Returns Market Linked Market Linked Market Linked Assured
Asset Allocation Subscribers can choose and change their asset allocation pattern based on their Risk – appetite. The asset allocation pattern, once chosen, can be changed four times in a year without any exit load. Based on the Investment Objective of the Scheme. Investor can-not customize it. Based on Investment Objective of the Scheme. Investor can-not customize it. Government Administered
Liquidity Limited liquidity before Normal Retirement Age (60 Years) Liquidity available subject to exit load Liquidity available subject to huge exit load Liquidity not before 7th Year
Tax Treatment on Maturity
  • The amount used for purchasing Annuity (Min 40%) – TAXFREE
  • Rest of the Withdrawal of the Retirement Corpus is totally TAXFREE. It means, it has a EEE Status.
  • Debt funds are taxed at Marginal Rate of Income Tax
  • LTCG on Equity Funds in excess Of Rs 1 lakh is taxed at the rate of 10% without the benefit of indexation
Maturity Amount TAXFREE Maturity Amount TAXFREE
Fund Managers Can be Changed two times in a Year without any exit load Can not be Changed Can not be Changed N/A

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 18-60 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) Schemes Available to Subscribers under Private Sector (All Citizens Model)

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

  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 65%
    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).
    Age Moderate Life Cycle Fund (LC-50) Conservative Life Cycle Fund (LC-25)
    Asset Class (in %) Asset Class (in %)
    E C G E C G
    Up to 35 years 50 50 50 50 50 50
    36 years 48 29 23 24 43 33
    37 years 46 28 26 23 41 36
    38 years 44 27 29 22 39 39
    39 years 42 26 32 21 37 42
    40 years 40 25 35 20 35 45
    41 years 38 24 38 19 33 48
    42 years 36 23 41 18 31 51
    43 years 34 22 44 17 29 54
    44 years 32 21 47 16 27 57
    45 years 30 20 50 15 25 60
    46 years 28 19 53 14 23 63
    47 years 26 18 56 13 21 66
    48 years 24 17 59 12 19 69
    49 years 22 16 62 11 17 72
    50 years 20 15 65 10 15 75
    51 years 18 14 68 09 13 78
    52 years 16 13 71 08 11 81
    53 years 14 12 74 07 09 84
    54 years 12 11 77 06 07 87
    55 years and above 10 10 80 05 05 90

    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
    Age Aggressive Life Cycle Fund (LC-75) Moderate Life Cycle Fund (LC-50) Conservative Life Cycle Fund (LC-25)
    Asset Class (in %) Asset Class (in %) Asset Class (in %)
    E C G E C G E C G
    Up to 35 years 75 10 15 50 30 20 25 45 30
    36 years 71 11 18 48 29 23 24 43 33
    37 years 67 12 21 46 28 26 23 41 36
    38 years 63 13 24 44 27 29 22 39 39
    39 years 59 14 27 42 26 32 21 37 42
    40 years 55 15 30 40 25 35 20 35 45
    41 years 51 16 33 38 24 38 19 33 48
    42 years 47 17 36 36 23 41 18 31 51
    43 years 43 18 39 34 22 44 17 29 54
    44 years 39 19 42 32 21 47 16 27 57
    45 years 35 20 45 30 20 50 15 25 60
    46 years 32 20 48 28 19 53 14 23 63
    47 years 29 20 51 26 18 56 13 21 66
    48 years 26 20 54 24 17 59 12 19 69
    49 years 23 20 57 22 16 62 11 17 72
    50 years 20 20 60 20 15 65 10 15 75
    51 years 19 18 63 18 14 68 09 13 78
    52 years 18 16 66 16 13 71 08 11 71
    53 years 17 14 69 14 12 74 07 09 84
    54 years 16 12 72 12 11 77 06 07 87
    55 years and above 15 10 75 10 10 80 05 05 90

    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