Government NPS

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The Central Government had introduced the National Pension System (NPS) with effect from January 01, 2004. In NPS, a government employee contributes towards pension from monthly salary along with 10 % to 14% contribution from the Govt.

These funds are then invested in earmarked investment schemes through chosen Pension Fund Managers.

What are the Tax Benefits under Government NPS?

On Government’s contribution: Contribution made by the Govt. for the employees is exempted under 80 CCD(2). This rebate is over and above 80 CCE limit of Rs.1.50 lakhs
Voluntary Contribution: Employee can voluntarily invest an additional amount of Rs. 50,000 (or more) to the NPS Tier I account and claim tax deduction on the same under section 80 CCD1(B), subject to a maximum of Rs. 50,000.
On Employee’s contribution: Employee’s own contribution is eligible for tax deduction under sec 80 CCD(1) of Income Tax Act up to 10% of salary (Basic + DA). This is within the overall ceiling of Rs. 1.5 lakhs under Sec. 80 CCE of the Income Tax Act.
Central Government NPS subscribers are allowed to claim tax benefits for self-contributions made to Tier II Tax Saving Scheme (TTS). Under this scheme the contributions will be locked for 3 years. This is within the overall ceiling of Rs. 1.5 lakhs under Sec. 80 CCE of the Income Tax Act.

Investment options for Government Employees

The Subscriber can select any one of the investment schemes as mentioned below:

Default Scheme: Investments would be done in default schemes of LIC, UTI and SBI. Each of the Pension Fund Managers will invest funds in the proportion of 85% in debt and 15% in equity.
Scheme G - 100% of contribution shall be invested in Government Bonds and related instruments.
Scheme LC 50: Life cycle fund where the Cap to Equity investments is 50% of the total asset.
Scheme LC 25: Life cycle fund where the Cap to Equity investments is 25% of the total asset.

Steps to Change the Pension Fund Manager and Investment Strategy

Joining NPS is made very easy and by following 3 simple steps you can start your retirement planning. Just follow these three steps below.

Login to Protean app or website using your PRAN
Select ‘Change Scheme Preference’ under ‘Transact Online’
Select the Tier type as ‘Tier I’ and click submit.
Post that select the option on PFM change & Scheme preference change.
Choose the DSP Pension as PFM and “Auto Choice” and submit. Select “Moderate Auto Choice”.
Submit the OTP received on your mobile to complete the request.

Here are some frequently asked questions about Government NPS

Responsibilities of Nodal Office in NPS

The Principal Accounts Office (PrAO) / Directorate of Treasury & Accounts (DTA) act as the oversight authority in NPS monitoring. As per the Standard Operating Procedure for NPS, the PrAO/DTA is required to discharge several functions, most of which are in the nature of monitoring performance of the registered Nodal Offices under its jurisdiction. The nature of activities required to be carried out by the PrAO/ DTA may be summarized as under:

Consolidate PAO/ CDDO/ DTO/ DDO registration forms and forward to CRA for registration.
Monitor the performance of PAO/ CDDO/ DTO/ DDO in discharging their responsibilities in CRA system.
Monitor the resolution of grievances raised against PAO/ CDDO/ DTO/ DDO.
Take necessary action to ensure compliance of PAO/ CDDO/ DTO/ DDO with the operational procedure of CRA system.
Authorisation of certain activities initiated by the underlying Nodal Offices.

PAO/ CDDO/ DTO is responsible for carrying out the following activities:

Consolidate DDO registration forms & forward it to CRA for registration.
Facilitate registration of Subscribers by consolidating the Common Subscriber Registration Form (CSRF) for allotment of PRAN received from the concerned DDO and forward it to the CRA-FC.
Distribution of PRAN kits to Subscribers.
Preparation and timely upload of Subscriber Contribution File (SCF) to NPSCAN system.
Deposit the contribution amount in the Trustee Bank as per the SCF uploaded in NPSCAN.
Processing of Voluntary and Tier II contributions.
Provide Transaction Statements to the registered Subscribers on request.
Maintenance of Subscriber Details such as changes/ update of demographic details, Bank Account details, Nomination details, PAN details, Aadhar seeding & update requests, PAN update requests, FATCA declaration, etc.
Update the Switch requests, New Scheme Preference requests, Inter Sector Shifting of Subscribers, Instant Reset of I-Pin for Subscribers and DDOs, etc.
Raise grievance on behalf of DDO and the Subscriber.
Resolve the grievance raised against it by any of the entities in the CRA system.
Exit Management of Subscribers (Withdrawal).

DDO is responsible for carrying out the following activities:

Obtain the duly filled CSRF for allotment of PRAN from the Subscribers, fill and certify the employment details and forward the same to PAO/ CDDO/ DTO.
Distribution of PRAN kit along with PIN mailers to the Subscribers.
Forward the Switch requests, New Scheme Preference requests, Change in Subscriber details request, Withdrawal Requests received from Subscribers to the PAO/ CDDO/ DTO.
Provide information to PAO/ CDDO/ DTO about Subscribers NPS contribution.
Can raise grievances against any interfacing entity under NPS. Feedback can also be provided to the concerned PAO for resolution of the grievances.
Can initiate withdrawal request online for underlying Subscribers and submit the withdrawal forms to the associated PAO/ CDDO/ DTO.

Subscriber Maintenance

Yes. As per the amendment in PMLA rules by the Government, NPS accounts should be linked with Aadhar.

The Subscriber has to submit the "Subscriber Details Change Request Form - Form S2" to the concerned DDO who in turn has to submit the same after verification to the concerned PAO/ CDDO/ DTO. PAO/ CDDO/ DTO will initiate the change requested by the Subscribers through NPSCAN System.

In case of any change in Mobile Number, Telephone Number and Email ID, the Subscribers can themselves update the said details by logging into CRA system or through NPS Mobile App with the I-PIN provided by CRA.

FPAO/ CDDO/ DTO can update the following requests of the Subscriber:

Change in Personal details including Bank details
Change in Employment details
Change in Nomination details
Change in Scheme details of Tier II
One way Switch request (transfer of amount from Tier II to Tier I)
Withdrawal request
Reissue of I-PIN and T-PIN
Reprint of PRAN Card
Update PAN and Aadhar details
Authorise Aadhar Seeding request
Bulk Upload of FATCA declarations
Print Statement of Transaction of a Subscriber associated with it on request.

The Subscriber has to submit Form S2 to the concerned DDO who will forward the request to the PAO/CDDO.
PAO/CDDO will raise the request online for reprint of PRAN Card.
On receipt of the online request, CRA will dispatch the PRAN card to the PAO/CDDO.
Reprint of PRAN card is a chargeable transaction.
Subscribers can also request for Reprint of PRAN Card by logging into the CRA System with the I-Pin provided by CRA.

As PRAN is unique and portable across employment & location, NPS contributions can be transferred by the prospective employer to same PRAN already allotted by previous employers after completion of Inter-Sector Shifting (ISS) for the PRAN.

At the time of registering the grievance, the Nodal Office shall provide the following details:

PAO registration number allotted by CRA.
Details of the grievance.
On whose behalf the grievance is being raised.
Category of Grievance.
Grievance Text.

Scheme Preference & Investment Options in Tier I Account

As per Ministry of Finance Gazette Notification dated January 31, 2019, the Central Government Subscribers, from April 1, 2019, will have the option of selecting the Pension Funds (PFs) and Investment Pattern in Tier I account.

Yes, a Subscriber is allowed to select the Pension Fund and Investment Pattern as per his/her choice at the time of registration under NPS. The Subscriber is required to provide the relevant details in the Subscriber Registration Form (CSRF).

The Subscriber can select any one of the following investment schemes:

Scheme G: 100% of contribution will be invested in Government Bonds and related instruments.
Scheme LC 25: It is the Life cycle fund where the Cap to Equity investments is 25% of the total asset.
Scheme LC 50: It is the Life cycle fund where the Cap to Equity investments is 50% of the total asset.

The Subscriber can change Scheme Preference online through his/her NPS account log-in. The Subscriber can follow the simple steps as given below:

Go to his/ her NPS account and log-in.
Click on sub menu "Scheme Preference Change" under main menu "Transaction".
Select Tier type and change the Scheme Preference as you intended to do.

Yes, you have the option to change your Pension Fund Manager. At present, the Subscriber can change the Pension Fund Manager once in a Financial Year.

Exit / Withdrawal

Upon Normal Superannuation: At least 40% of the accumulated pension wealth of the Subscriber has to be utilized for purchase of an Annuity providing for monthly pension to the Subscriber and the balance is paid as lumpsum to the subscriber.
In case the total corpus in the account is less than or equal to Rs.5 lakh as on the Date of Retirement, the Subscriber can avail the option of complete Withdrawal.
Upon Death: At least 80% of the accumulated pension wealth of the Subscriber has to be utilized for purchase of an Annuity, providing for monthly pension to the Spouse and the balance is paid as lumpsum to the nominee/legal heir.
In case the total corpus in the account is less than or equal to Rs.5 lakh as on the Date of Death of the Subscriber (Government sector), nominee/legal heir can avail the option of complete Withdrawal.

Further, if family member opts for family pension, as per the Regulations, all the accumulated pension wealth shall be transferred to the bank account of the Nodal Office for further settlement as per Government directives.
Pre-mature Exit: At least 80% of the accumulated pension wealth of the Subscriber has to be utilized for purchase of an Annuity providing the monthly pension to the Subscriber and the balance is paid as a lumpsum to the Subscriber.

In case the total corpus in the account is less than or equal to Rs.2.5 lakh as on the Date of Resignation, the Subscriber can avail the option of complete Withdrawal.

A Subscriber can decide to remain invested in NPS (Up to 70 years) or can exit from NPS. Following options are available to NPS Subscribers:

Continuation of NPS account: A Subscriber can continue to contribute to NPS account beyond Retirement (Up to 70 years) and avail additional tax benefit on the contribution.
Deferment of Withdrawal: Subscriber can defer his/her Withdrawal and stay invested in NPS up to 70 years of age. Subscriber can defer only lumpsum Withdrawal, defer only Annuity or defer both lumpsum as well as Annuity.
Start your Pension: If a Subscriber does not wish to continue/defer NPS account, he/she can exit from NPS. He/she can initiate exit request online and as per NPS exit guidelines, he/she can start receiving pension.

In the context of NPS, voluntary retirement is treated as pre-mature Exit.

Online Withdrawal request can be initiated by the Subscribers using I-PIN provided to them. Such requests need to be verified and authorized by the nodal office.

The Withdrawal proceeds are credited in the Subscriber/Claimant bank account (as per the bank details provided at the time of initiating online Withdrawal request) through electronic mode only.

In case of Superannuation & Pre-mature Exit, the Subscriber can purchase any one scheme which are available with the respective Annuity Service Provider. However, in case of death, Spouse has to purchase Default Annuity Scheme.

No, upon exit from Tier-1 account, Tier-2 account gets closed automatically.