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NPS (National Pension System)

NPS is a pension scheme introduced by Govt. of India on 1st Jan-2004. This pension scheme is regulated by PFRDA (Pension Fund Regulatory and Development Authority).

Initially, was introduced for the new government recruits (except armed forces). National Pension System was extended to all citizens of India on a voluntary basis on 1st May-2009. Even, NRIs can also subscribe to this scheme.

The subscriber of NPS is allotted a unique Permanent Retirement Account Number (PRAN). This unique can be used from any location in India and remains the same for the subscriber's life.

Tax Exemption is available under the Income Tax Act, 1961. 

Contribution Amount

The minimum contribution amount for this scheme is Rs 6000/- in a financial year. The contribution can be made in one installment or in multiple installments subject to minimum of Rs. 500/-. Contribution gets divided into two accounts (Tier I and II) depending upon one's choice.

Types of Account under PRAN

Tier I Account: This is a non-withdrawable account and is meant for savings for retirement. Subscription to this account is mandatory. 

Tier II Account: This is a withdrawable account. Tax Benefit is not available on this account. Subscription to this account is voluntary.

Asset Classes under PRAN:

Asset Class E: Equity
Asset Class C: Corporate Bonds
Asset Class G: Government Bonds

Choices Available

There are two types of choices available in relation to above Asset Classes:

Active Choice
Subscribers can allocate their investments in Class E, C and G as per their choice with an upper limit of 50% in Class E and remaining in asset class C and G.

Auto Choice
Subscribers can opt for auto choice where the allocation to Class E, C and G is done as per the Life Cycle table provided in the Offer document.

Above choices can be changed (Asset allocation and / or fund manager) once in a financial year.


Returns on the Investment does not earn any fixed return but is dependent on the investment choices. This is based on NPV for the investment.

Only one Account

Like PPF, one individual can open only one NPS account.


Retirement age is 60 years and at the time of retirement, one need to annuitize minimum 40% of savings to purchase an annuity scheme from a life insurance company of your choice. One can purchase annuity for more than 40% also.

Remaining 60% can be withdrawn as a lump sum within 10 years of retirement, i.e. before 70 years of age

One can opt for retirement before 60 years. In this case, one is required to use 80% of savings to purchase the annuity and balance 20% can be withdrawn as a lump sum

Entities in NPS

Point of Presence (POP) : POPs are the first points of interaction of the subscriber. PFRDA has authorized 58 institutions including banks (private and public), financial institutions and the Department of Posts as Points of Presence (POPs) for opening the NPS accounts.

Central Recordkeeping Agency (CRA) : The recordkeeping, administration and customer service functions for all subscribers of the NPS are being handled by CRA i.e. the National Securities Depository Limited (NSDL).

NPS account charges are as follows:


Charge head

Service charges*

Method of Deduction


PRA Opening charges


Through cancellation of units at the end of each quarter.

Annual PRA Maintenance cost per account


Charge per transaction



Initial subscriber registration


To be collected upfront

(Maximum Permissible charge for each subscriber)

Initial contribution upload

0.25% of the initial contribution amount from subscriber subject to a minimum of Rs.20 and a maximum of Rs.25,000/-


Any subsequent transaction involving contribution upload

0.25% of the amount subscribed by the NPS subscriber, subject to minimum of Rs.20/- and a maximum of Rs.25000/-.


Any other transaction not involving a contribution from subscriber