Frequently Asked Questions (FAQs) about NPS, PFRDA &

Pension Fund investment.

1. What is the National Pension System (NPS)?

The NPS is a new contributory pension scheme launched by Government of India with effect from 1st
January 2004. NPS is regulated by Pension Fund Regulatory and Development Authority (PFRDA), was first
introduced for government employees and then in end 2009 for all citizens of India. Under the NPS, you can
regularly invest your money into your pension account and have an option of taking a part of the corpus as
lump sum amount and the balance in form of fixed monthly income. Use this NPS calculator to understand
all the benefits of NPS at a glance.

2. Who can subscribe for NPS?

A citizen of India, whether resident or non-resident, subject to the following conditions: You should be
between 18 - 65 years of age as on the date of submission of his application to the POP / POP-SP.

You should comply with the Know Your Customer (KYC) norms as detailed in the Subscriber Registration
Form. The Subscriber Registration Form attached with this offer document should be duly filled-in by the
applicant and all terms and conditions mentioned therein should be duly complied with. All the documents
required for KYC compliance need to be mandatory submitted.

3. Who cannot join NPS?

The following applicants cannot join:

1. Undercharged insolvent: Individuals who are not granted an 'order of discharge' by a court

2. Individuals of unsound mind: An individual is said to be of unsound mind for the purposes of making a
contract if, at the time when he makes it, he is incapable of understanding it and of forming a rational judgment
regarding its effect upon his/her self-interest

3. Pre-existing account holders under NPS

4. If I have invested in any other Provident Fund, can I still invest in NPS?

Yes. Investment in NPS is independent of your contribution to any Provident Fund.

5. What are the benefits of joining the NPS?

It is voluntary -NPS is open to every Indian citizen. You can choose the amount you want to set aside and
save every year. Extending old age security coverage & income to all citizens
It is flexible -You can choose your own investment option and Pension Fund Manager and see your money
grow
It is portable-You can operate your account from anywhere in the country, even if you change your city, job or
your Pension Fund Manager
It is regulated -NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and
performance review of Fund Managers by NPS Trust
Reasonable market based returns -over the long term
Tax benefits -Contribution towards NPS exempted under Section 80C
Low cost investment - Cost effective mode of planning for one's retirement

6. What are the tax benefits of NPS?

Employer contributing to the NPS on behalf of an employee will get deduction from his income (i.e.
employer's income) an amount equivalent to the amount contributed or 10% of basic salary plus DA of the
employee, whichever is less (Section 36 (1)(iv a) of the Income Tax Act 1961) under section 80CCD (2).

(In simple terms - Corporate can help their employees to lessen tax burden by saving in NPS up to 10% of
their basics salary. This investment is another avenue over & above those of Section 80C investments to
secure their retirement well in advance).
Additional contribution by individual employee is eligible for deduction from Income under Section 80CCD(1
a) of the Income Tax Act 1961. However, investments under Section 80C plus the premium on pension
products on Section 80CCC should not exceed Rs. 1.5 Lakh per assessment year to claim for the deduction.

Individual/employee can contribute Rs 50000 in NPS and avail tax benefits under Section 80CCD(1b).

7. Is there any maximum age limit for making further contribution to NPS Tier-I account?

At the age of 60 years or Superannuation age when Subscriber opts for deferment option / exit option
immediately, he / she will have a choice to contribute further to NPS account till 70 years of age. Please
note that fresh enrollment in NPS is not allowed after 65 years of age.

8. How can a subscriber get registered for NPS?

Any Individual who wants to get registered as a subscriber and wants to open a Permanent Retirement
Account (PRA) (Tier-I) in NPS would submit the duly filled form (Composite application form for subscriber
registration) with other supporting KYC documents to a POP. (i.e. PAN Card & Address Proof self attested
copy, passport size photo graph and cancelled cheque (in case of Corporate NPS) or Cheque of Rs. 625/- in
favor NPS Account ( incase of Individual Account).

9. How much does a subscriber need to contribute for Tier-I ?

You are required to make your first contribution at the time of applying for registration with the POP-SP.

You are required to make contributions subject to the following conditions:

Minimum amount per contribution - Rs. 500,
Minimum contribution per year - Rs. 1,000,
Minimum number of contributions - 01 per year

Over and above the mandated limit of a minimum of 1 contribution, you may decide on the frequency of the
contributions across the year as per your convenience. PFRDA will impose penalties on intermediaries in
case of delay beyond this period.
10. Is there any upper limit of investment?

No, there is no upper limit on investment in NPS.

11. What is CRA?

CRA stands for "Central Record Keeping Agency", it is the core infrastructure of the National Pension
System. It is managed by NSDL & main function is record keeping, administration and customer service
functions for all subscribers of the NPS. Issuing of unique Permanent Retirement Account Number (PRAN) to
each subscriber, maintaining a database of all PRANs issued and recording transactions relating to each
subscriber's PRAN.

12. How much time is required for registration?

After the registration forms are submitted to a POP, the same is forwarded to CRA - Facilitation Centers
(CRA-FC). PRAN is generated and the PRAN Card is printed and dispatched within 20 days from the date of
receipt of duly filled registration form at the CRA - Facilitation Centre.

13. Do I get any receipt on submission of my application?

Yes, an email confirmation to registered email ID would be sent on successful acceptance of your
application with the acknowledgement number generated by POP.

14. When would my contribution be debited from my account?

The 1st contribution would be debited post PRAN generation. (in case of Individual NPS)

In case of Corporate NPS money would be contributed by the Corporate.

15. What are the charges and when will be the charges deducted for the corporate employees?

One time charge:

A) POP charge - Rs 200
B) CRA Charge – Rs 40
Total – Rs 240
One time charge is deducted when the first contribution is made.
Recurring Charge:
A) POP Charge – 0.25 % of the contribution (Deducted whenever the
contribution is made) (subject to minimum of Rs. 20 and a
maximum of Rs. 25,000).
B) CRA Maintenance Charge – Rs 95 per annum ( Deducted based
on the quarterly basis through NAV deduction )
C) CRA Financial Charge – Rs 3.75 ( Deducted whenever the
contribution is made through NAV deduction)
D) PFM Charge - 0.01% per annum ( Through NAV deduction)
 E) Custodian Charge – 0.0032% per annum (Through NAV
deduction)
F) NPS Trust Charge – 0.005% per annum (Through NAV deduction)

Non Financial transaction charges subject to the servicing:

A) POP Charge of Rs 20 ( Charged upfront when ever the transaction is done)
B) CRA non financial Charge – Rs 3.75 ( Though NAV deduction)

Examples of Non financial transactions

Change in subscriber details.
Change of investment scheme / Fund Manager.
Processing of withdrawal request.
Processing of request for subscriber shifting.
Issuance of printed account statement.
Any other subscriber services as may be prescribed by PFRDA.

16. How do I come to know about the PRAN?

Once the PRAN is generated, an email alert as well as a SMS alert will be sent to the registered email ID and
mobile number of the subscriber. For security reason, only the last four digits are mentioned in the alert.
Subscribers can know the PRAN on receipt of the PRAN Kit or they can also approach POP for the PRAN.

17. What is PRAN and PRAN Kit?

On successful registration, a PRAN (Permanent Retirement Account Number) will be allotted to the
subscriber. A PRAN Kit containing PRAN Card, subscriber details (referred as Subscriber Master List) and an
information booklet is sent to the subscriber's registered address. The T-PIN and I-PIN are sent separately
to the registered address.

The PRAN Card is a document with PRAN, subscriber's name, father's name, photograph and signature /
thumb impression. This card proves the completeness of information in the CRA system. A copy of the card
is required for Tier-II activation and also for subsequent contribution in Tier-II account. The Subscriber
Master List shows all the information as provided by the subscriber in his/her application and accordingly
captured in CRA system. A subscriber may verify the correctness of the information submitted for
registration by looking at the Subscriber Master List.

18. Whom to contact for non-receipt of PRAN Card?

PRAN Card is dispatched to the registered address within 20 days from the day of receipt of duly filled
registration form at the NSDL CRA office. You may write to the POP at [email protected]
19. What are the Withdrawal criteria in NPS ?

• Subscriber can withdraw up to 25% of individual contribution amount anytime after 3 years. 2nd
and 3rd withdrawal will be allowed in the consecutive years after the first withdrawal is made.

• Please note that withdrawal amount will be calculated on Contributed amount and not on the
Corpus.
• Withdrawal will be only for specific purposes like Child’s marriage, Higher education, treatment of
some of the critical illnesses etc. As the PFRDA guidelines

• For Corporate Subscribers, amount invested to avail of the benefit of section 80CCD (2) will not be
allowed for withdrawal till the Subscriber attains the age 60 years / Superannuation age of the
Corporate

20. What are the exit criteria in NPS?

• Subscriber cannot exit from NPS before 10 years after subscribing to it.

• For retail Subscriber normal exit from NPS would be at the age of 60 years. For Corporate
Subscriber it is modified as 'Superannuation age' defined by the Corporate. That means, if the
Corporate has superannuation age / retirement age defined as 58 years, the Subscriber can exit
from NPS at that age by withdrawing up to 60% lump sum and investing minimum 40% in
Annuity, he will start receiving pension immediately from the very next month on the
basis of the annuity amount accumulated

• In case of pre-mature exit, the earlier clause remains intact. Subscriber will get up to 20% in lump
sum and balance 80% will get annualized immediately(as per the annuity age of respective
annuity service provider will be applicable)

21. What investment choice / scheme preference does the subscriber have?

The NPS offers you two approaches to invest your money:

Active choice - Individual Funds (Asset Class E, Asset Class C, and Asset Class G)
Auto Choice - Life cycle Fund

22. What is Active choice option?

You will have the option to actively decide as to how your NPS pension wealth is to be invested in the
following three options:

Asset Class E - Investments in predominantly equity market instruments.

Asset Class C - Investments in fixed income instruments other than Government securities.
Asset Class G - Investments in Government securities.
 You can choose to invest your entire pension wealth in C or G Asset Classes and up to a maximum of 50%
in equity (Asset Class E). You can also distribute your pension wealth across E, C and G Asset Classes,
subject to such conditions as may be prescribed by PFRDA.In case you decide to actively exercise
your choice about investment options, you shall be required to indicate your choice of Pension
Fund Manager (PFM) from among the seven Pension Fund Managers (PFMs) appointed by
PFRDA. In case you do not indicate any choice of PFMs, your form shall not be accepted by the
POP-SP.

While exercising an Active Choice, remember that your investment allocation is one of the most important
factors affecting the growth of your pension wealth. If you prefer this "hands-on" approach, keep the
following points in mind:

Consider both risk and return. The E Asset Class has higher potential returns than the G Asset Class, but it
also carries the risk of investment losses. Investing entirely in the G Asset Class may not give you high
returns but is a safer option.

You can reduce your overall risk by diversifying your investment. The three individual asset classes offer a
broad range of investment options; it is good not to put "all your eggs in one basket."

The amount of risk you can sustain depends upon your investment time horizon. The more time you have
before you need to withdraw from your account, the more is the risk you can take (This is because early
losses can be offset by later gains).

Periodically review your investment choices. Check the distribution of your account balance among the
funds to make sure that the mix you chose is still appropriate for your situation. If not, rebalance your
account to get the allocation you want.

23. What is Auto Choice - Life cycle Fund?

NPS offers an easy option for those participants who do not have the required knowledge to manage their
NPS investments. In case you are unable / unwilling to exercise any choice as regards asset allocation, your
funds will be invested in accordance with the Auto Choice option. You will, however, be required to indicate
your choice of PFM. In case you do not do so, your form shall not be accepted by the POP-SP. In this
option, the investments will be made in a life cycle fund. Here, a pre-defined portfolio will determine the
fraction of funds invested across three asset classes. At the lowest age of entry (18 years), the Auto Choice
will entail investment of 50% of pension wealth in "E" Class, 30% in "C" Class and 20% in "G" Class. These
ratios of investment will remain fixed for all contributions until the participant reaches the age of 36. From
age 36 onwards, the weight in "E" and "C" Asset Class will decrease annually and the weight in "G" Class
will increase annually till it reaches 10% in "E", 10% in "C" and 80% in "G" Class at age. Like the Active
Choice, you must choose one PFM under the Auto Choice.

 In case of Auto Choice, reallocation among the asset classes shall take place on the
date of birth of the subscriber. Net Asset Value (NAV) will be released on a regular
basis so that you may be able to take informed decisions.
24. Can I select both investment choices when investing in NPS?

No. You have to select either Active Choice or Auto Choice as your option when making investments under
NPS.

25. What is Annuity?

Annuity (Pension) is a contract between a person and an insurance company by which a fixed sum of
money is paid periodically

Employee can purchase annuity from Annuity Service Providers (ASP) at the time of retirement or on
decision to withdraw from NPS

Preferred annuity options available are:

1. Annuity With Return Of Corpus - Annuity is paid as long as person is alive. In case of
death, corpus is paid to nominee

2. Joint Life Last Survivor Annuity - Annuity is paid as long as person is alive. In case of
death, 50%/100% of annuity is paid to spouse as long as spouse is alive.

26. What is the difference between Annuity and Interest rate?

In case of Annuity once it is decided, it remains constant in the normal course where as in case of
Interest rate, it always runs a risk of reinvestment. Every 5-7 Years once the Bank revises the rate. As
result any pension option other than annuity has a challenge of volatility in the take home of the
annuitant.