Frequently Asked Questions – Corporate Sector

1. What is National Pension System?

National Pension System (NPS) is a defined contribution pension. NPS is voluntary for subscription by an individual
to make contributions to his/her Individual Pension Account during the working life for creating a pension corpus
from which regular income will be generated after retirement / working age.

NPS is mandatory for the Central Government recruits w.e.f. 1st Jan 2004 (except armed forces) which replaced
the earlier defined benefit pension and has been subsequently adopted by almost all State Governments for their
employees.

2. What are the features of NPS?

o Regulated - NPS is regulated by PFRDA, which is established through an Act of Parliament. (PFRDA Act 2013)
o Pension for All - can be voluntarily subscribed by any Indian Citizen (resident/non- resident/overseas citizen).
o Low Cost – NPS is one of the lowest cost pension schemes in the world.
o Flexible - Subscribers have choices of Point of Presence (PoP), Central Recordkeeping Agency (CRA), Pension
Fund and Asset Allocation. The choices exercised can be changed subsequently.
o Portable – NPS account can be transferred across employment, location/geography.
o Tax efficient – Tax incentives are available to subscribers under the Income Tax Act 1961.
o Optimum returns – Market linked returns based on investment choice made by the subscriber.
o Transparent – Subscribers can access their NPS accounts online 24X7 and public disclosures mandated.

3. What is the structure of NPS? Why there are different intermediaries in NPS?
NPS has a unique unbundled architecture wherein each intermediary (PoP, Pension Fund, Central Recordkeeping
Agency, Trustee Bank, Annuity Service Provider, Retirement Advisors, Custodian, NPS Trust) is assigned a
specialized activity by the Regulator. This ensures economies of scale and operational/intermediation costs at
bare minimum to subscribers.

This unique structure safeguards subscribers’ interest as the role of a particular intermediary is limited to
the functions assigned to it and no single intermediary/entity has complete control over NPS as a System.

4. What is Corporate Sector? NPS caters to which all Sectors?

NPS can be extended by an employer as a retirement benefit scheme to the employees and NPS Account
having employer-employee relationship (non-government) are classified / categorized as Corporate
Sector. An Employer can adopt NPS along with other retirement benefit schemes and contributions.
 towards NPS in Corporate Sector can be either from employer/employee only or from both employer/employee in
varied proportions.

5. Who all are eligible to join NPS through their employer?

o Employee of a corporate / entity which has implemented NPS
o Aged between 18-70 years
o Compliant to Know Your Customer (KYC) norms.

6. I have subscribed to EPF / PPF / Superannuation Fund / Provident Fund. Can I join NPS?
Yes. NPS can be voluntarily subscribed along with any other pension scheme(s). However, an individual cannot
have multiple NPS accounts.

7. How much pension will I receive in NPS?

The amount of pension will depend on the contribution amount, accrual/returns on the investments and the
portion of corpus utilized by the subscriber for purchasing annuity plan from any of the Annuity Service Providers
empaneled with PFRDA.

8. What are the features of Tier-I and Tier-II accounts?

Tier – I Tier – II
Individual Pension Account Optional Account – Require an active Tier-I
Withdrawal / exit as per rules/regulations only Unrestricted withdrawals
Min. Contribution Rs. 500 Min. Contribution to open Rs. 1000
Min. Contribution per year Rs. 1000 Min. Contribution Rs. 250
Tax benefits are available No tax benefits on contribution/gains
Any Citizen aged between 18-70 is 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

9. How often can I change the choices I have made?

Subscribers can subsequently request to change the choices exercised as under:
Choice Frequency Mode / method
i. Online – Login to your account or
Pension Fund Once in a Financial Year
ii. Offline - Physical Application to PoP
Four times in a Financial i. Online – Login to your account or
Investment Choice
Year ii. Offline - Physical Application to PoP
10. How do I access my NPS account?
Subscriber can access their Pension Account through
o Physical mode – by visiting his/her service provider (Employer/PoP)
o Online - using login credentials provided by CRA in the Account Opening Kit
o Web-based login
o Mobile Application

11. When and how will my contributions reflect in my NPS account?

It normally takes three working days for the contributions to get reflected in your NPS account. The process
flow entails:
o Receipt/realization of contribution in service provider’s (PoP) bank account
o Upload of details by service provider (PoP) to CRA and fund remittance to Trustee Bank
o Transfer of the funds by Trustee Bank to Pension Fund based on CRA instructions
o Investment of the funds by Pension Fund and declaration of scheme NAV
o Allocation of units by CRA for the contributed amount
o Reflection of corresponding units in the subscriber’s NPS account
Subscribers will receive SMS & Email confirmations for credit of units in account.

12. How do I evaluate my NPS investments?

Subscriber can compare the performance of his/her Pension Account vis a vis the performance of each Asset
Classes and each Pension Funds which is available at the following web link http://npstrust.org.in/returncalc

The returns generated by the Pension Funds for each Asset Class is published on a weekly basis by NPSTrust and
available at the following web link http://npstrust.org.in/return-of-nps-scheme

The portfolio of Asset Classes managed by each Pension Fund is periodically published by the PensionFunds on their
websites. http://npstrust.org.in/content/scheme-portfolio

13. Can my employer forfeit its contributions if I resign from job?

The employer cannot forfeit pension corpus from NPS account, if employee resigns from the organization.

However, in case of employer being owned and controlled, either by the Central / State Government or a Government
company, if so specifically provided in the service rules governing the terms of employment of the subscriber with
it, the employer has the right to withhold its co-contributions including accruals hereon, for the purpose of
recovery of the whole or part of any pecuniary loss caused, provided such loss is established, in any departmental or
judicial proceedings, initiated against such subscriber by such employer.

14. Whether an employee has the facility to avail loan/advances from NPS?
No.

15. When can I withdraw my money from NPS Account?

A subscriber can withdraw from NPS in the following circumstances/conditions:
 i) Partial Withdrawal - after completion of 3 years subscriber can withdraw 25% of his/her own contributions for
specific reasons viz illness, disability, education or marriage of children, purchasing property, starting a new venture. A
subscriber can partially withdraw upto a maximum of 3 times during his/her entire tenure in NPS.
ii) Premature Withdrawal – Any time before attaining age of 60 years or superannuation or before completion
of 03 years (if subscriber joined NPS after attaining 60 years of age), subscriber can withdraw maximum 20% of the
corpus as lumpsum and minimum 80% of the corpus has to be utilized for purchasing an annuity plan for receiving
the pension. If the accumulated corpus is less than Rs 2.5 lakh, the entire corpus is paid as lumpsum to the
subscriber.
iii) Normal Withdrawal – on attaining age of 60 years or superannuates in accordance with the service rules
applicable to such subscriber (if subscriber has joined NPS before 60 years of age) or after completion of 03 years (if
subscriber has joined NPS after 60 years of age), 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

Subscriber also has the option to: -

(i) Continue in NPS till the age of 75 years or exit any time after such continuance before 75 years.
(ii) While exiting from NPS, subscriber can.
▪ Defer receiving the lumpsum (60% corpus) till the age of 75 years or withdraw the same in
installments till 75 years
▪ Defer Annuity purchase (40% corpus) till the age of 75.

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.

16. What if I don’t want to exit from NPS at age of 60 years / superannuation?
On attaining the age of 60 years or superannuation, the NPS account of a corporate subscriber will be auto- continued
under All Citizen Model upto 75 years of age. Subscriber can exercise the option of normal exitfrom NPS at any point
of time he/she wishes, after attaining the age of 60 years / superannuation. At theage of 75 years, the account
must be closed mandatorily.

17. What are the specific reasons or conditions for partial withdrawals?
Partial withdrawals from your NPS account are allowed for dealing with contingency situations and following are
the reasons/conditions for which partial withdrawal is allowed:
o Higher education of his/her children
o Marriage of his/her children
o Purchase or construction of residential house or flat
o Treatment of specified illnesses
o Disability of more than 75%
 o Skill development/re-skilling or any other self-development activities
o Establishment of own venture or any start-ups

18. How to request withdrawals from NPS Account?

Requests for withdrawals from NPS can be initiated by the subscriber by login to his/her Pension Account

19. How will I receive my pension?

Subscriber will receive pension from the Annuity Service Provider (ASP) according to the Annuity Plan chosen and
purchased by the subscriber from the ASP (Insurance Company) and the terms and conditions therein.

IV.Tax rules under NPS

Tier-I account – Tax benefits on Contributions

i. NPS Contributions are eligible for tax deduction u/s 80 CCD (1) of Income Tax Act upto 10% of basic + DA or upto
20% of Gross Income for self-employed within the overall ceiling of Rs. 1.50 Lacs under Sec. 80 CCE.
ii. An additional deduction upto Rs. 50,000/- is available u/s 80CCD 1(B) of Income Tax Act.
iii. In case the subscriber receives contributions from the employer also, tax deduction under section80 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 towards NPS, Recognized Provident Fund and
Approved Superannuation Fund.
‘Employer contributions’ made by an in the NPS accounts of their employees (upto 10% of the salary) can be
claimed for deduction as ‘Business Expense’ from Corporates Profit & Loss Accountas per section 36(1)(iv)(a) of
IT Act.

Tier-I account – Tax implications on Withdrawals / Exit

i. Maximum 60% of the total corpus received as lumpsum at the time of exit is not treated as income u/s 10 (12A) of
Income Tax Act
ii. Amount utilized for purchase of annuity plan from ASP on exit (minimum 40% mandatory upto100% of corpus)
is not treated as income u/s 80CCD (5) of Income Tax Act
iii. Goods and Service Tax (currently 1.8%) is not applicable on annuity plan purchased through NPS on exit.
iv. Amount received from partial withdrawal are tax exempt u/s 10 (12B) of Income Tax Act.

Tier-II account:

i. No tax benefits are available on contributions made in an NPS Tier-II account.

ii. No tax rebates/special treatment for the gains arising out of investment in NPS Tier-II. The assessee shall
be liable for taxation as per the marginal tax rate applicable to him/her.

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