National Pension System – FAQs

Ques 1. Who can join NPS?

Ans. Any Indian citizen between 18 and 60 years can join NPS. The only condition is that the person must comply with know your customer (KYC) norms.

 

Ques 2. Is saving with the National Pension System allowed for an NRI?

Ans. Yes, an NRI can join NPS. However, the account will be closed if there is a change in the citizenship status of the NRI.

 

Ques 3. What are the documents needed for opening an NPS account?

Ans. You should fill the subscriber registration form and submit it along with proof of identity, address, and date of birth to the POP

 

Ques 4. Can an individual invest in more than one National Pension Scheme?

Ans. No, the scheme comes with a unique PRAN for each individual and thus does not allow multiple accounts for a single person. In fact, there is no need to open a second account as NPS is portable across sectors and locations.

 

Ques 5. What is a Permanent Retirement Account Number (PRAN)?

Ans. Every NPS subscriber is issued a card with a 12-digit unique number called Permanent Retirement Account Number or PRAN.

 

Ques 6. How do I join NPS?

Ans. You should open an NPS account with entities known as Point of Presence (POP). Most banks, both private and public sector, are enrolled as POPs. Several financial institutions also act as POPs. The authorized branches of a POP called point of presence service providers (POP-SPs), act as the collection points.

 

Ques 7. How would I know if my bank serves as a PoP for the scheme or not?

Ans. You can check the list of authorized PoPs at NPS’s official website to confirm whether your bank serves as a PoP or not. https://www.npscra.nsdl.co.in/pop-sp.php

 

Ques 8. What is the minimum contribution in NPS?

Ans. You have to contribute a minimum of Rs 6,000 to your Tier-I account in a financial year.

 

Ques 9. What will happen if I don’t make the minimum contribution?

Ans. If you do not contribute the minimum amount, your account will be frozen. You can unfreeze the account by visiting the POP and pay the minimum required amount and a penalty of Rs 100.

 

Ques 10. Will the government also contribute to my NPS account?

Ans. No, the government will not contribute to your NPS account.

 

Ques 11. Who manages the money invested in NPS?

Ans. The money invested in NPS is managed by PFRDA-registered Pension Fund Managers. At the moment, there are eight pension fund managers: ICICI Prudential Pension Fund, LIC Pension Fund, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund, SBI Pension Fund, UTI Retirement Solutions Pension Fund, HDFC Pension Management Company, and DSP BlackRock Pension Fund Managers.

 

Ques 12. What are the investment choices available in NPS?

Ans. The National Pension System or NPS offers two choices:

1) Active Choice: This option allows the investor to decide how the money should be invested in different assets.

2) Auto choice or lifecycle fund: This is the default option that invests money automatically in line with the age of the subscriber.

 

Ques 13. What are the investment options available under Active Choice?

Ans. The Active Choice offers three funds or investment options: Asset Class E (invests 50 percent in stocks); Asset Class C (invests in fixed income instruments other than government securities); Asset Class G (invests only in government securities). An investor can choose one of these funds or opt for a combination of them.

 

Ques 14. Can I change my investment choices?

Ans. Yes, you can change your investment choices once in a financial year for both Tier-I and Tier-II accounts.

 

Ques 15. Can I change my scheme and pension, fund managers?

Ans. Yes, you can change your scheme preference and pension fund manager. You can even change your investment option (active and auto choices).

 

Ques 16. What are Tier-I and Tier-II accounts?

Ans. NPS offers two accounts: Tier-I and Tier-II accounts. Tier-I is a mandatory account and Tier-II is voluntary. The big difference between the two is the withdrawal of money invested in them. You cannot withdraw the entire money from the Tier-I account till your retirement. Even on retirement, there are restrictions on withdrawal on the Tier-I account. The subscriber is free to withdraw the entire money from the Tier-II account.

 

Ques 17. Can I have different pension fund managers and investment option for Tier I and Tier II account?

Ans. Yes, you can select different pension fund managers and investment options for your NPS Tier I and Tier II accounts.

 

Ques 18. What are the tax benefits available for NPS?

Ans. An employee’s contribution is eligible for a tax deduction --up to 10 percent of the salary (basic plus DA) – under Section 80CCD(1) of the Income Tax Act within the overall ceiling of Rs 1.5 lakh allowed under Section 80C and Section 80CCE.

The employer’s contribution to NPS is exempted under Section 80CCD (2).

Moreover, individuals can claim an additional deduction of up to Rs 50,000 under Section 80CCD (1B), which is in addition to Rs 1.5 lakh permitted under Section 80C.

A self-employed person can also contribute 10 percent of his gross income under Section 80CCD (1) in NPS.

 

Ques 19. When can I withdraw money from NPS?

Ans. NPS is a pension product. So, you are expected to stay invested until your retirement. At 60, you must use at least 40 percent of the corpus to buy an annuity income from a PFRDA-listed insurance company. You have the option to withdraw 60 percent of the corpus tax-free.

 

Ques20. Can I defer withdrawing the lump sum amount at 60?

Ans. Yes, you can defer withdrawing the lump sum amount in NPS until you are 70 years old.

 

Ques 21. What if I want to take the money out when I am 60?

Ans. If you are getting out of the scheme before you are 60 years old, you can only withdraw 20 percent of the accumulated corpus in NPS. You must use 80 percent of the corpus to buy an annuity.

Ques 22. What happens to the money if I discontinue the scheme?

Ans. If you discontinue your investment, your account will be frozen. You can reactivate the account only if you make the minimum contribution required along with the penalty.

 

Ques 23. What happens if the subscriber dies before 60 years?

Ans. If the subscriber dies before 60 years, the entire accumulated wealth would be paid to the nominee/legal heir of the subscriber.

 

Ques 24. How do I withdraw the money from NPS?

Ans. You will have to submit the withdrawal application to the POP along with relevant documents. POP would authenticate the documents and forward them to the Central Record-keeping Agency (CRA) and NSDL. CRA would register your claim and forward you the application form along with details of documents that need to be submitted. Once you complete the necessary procedure, CRA processes the application and settles the account.

 

Ques 25. What are the documents to be submitted along with withdrawal forms?

Ans. You have to submit the following documents along with the withdrawal forms:

  1. PRAN card (original)
  2. Attested copy of proof of identity
  3. Attested copy of proof of address
  4. A canceled cheque

 

You can also read the following articles to learn more about NPS:

  1. NPS: National Pension Scheme

  2. How to apply for NPS?

  3. Tax benefits of NPS

  4. NPS Withdrawal Rules

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