Home » NPS (Pran Card)

NPS (Pran Card)


        National Pension System - Retirement Plan for All


Pension plans provide financial security and stability during old age when people don't have a regular source of income. Retirement plan ensures that people live with pride and without compromising on their standard of living during advancing years. Pension scheme gives an opportunity to invest and accumulate savings and get lump sum amount as regular income through annuity plan on retirement.

According to United Nations Population Division World's life expectancy is expected to reach 75 years by 2050 from present level of 65 years. The better health and sanitation conditions in India have increased the life span. As a result number of post-retirement years increases. Thus, rising cost of living, inflation and life expectancy make retirement planning essential part of today's life. To provide social security to more citizens the Government of India has started the National Pension System.

National Pension System 

Government of India established Pension Fund Regulatory and Development Authority (PFRDA) - External website that opens in a new window on 10th October, 2003 to develop and regulate pension sector in the country. The National Pension System (NPS) was launched on 1st January, 2004 with the objective of providing retirement income to all the citizens. NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens.

Initially, NPS was introduced for the new government recruits (except armed forces). With effect from 1st May, 2009, NPS has been provided for all citizens of the country including the unorganised sector workers on voluntary basis.

Additionally, to encourage people from the unorganised sector to voluntarily save for their retirement the Central Government launched a co-contributory pension scheme, 'Swavalamban Scheme - External website that opens in a new window' in the Union Budget of 2010-11. Under Swavalamban Scheme - External website that opens in a new window, the government will contribute a sum of Rs.1,000 to each eligible NPS subscriber who contributes a minimum of Rs.1,000 and maximum Rs.12,000 per annum. This scheme is presently applicable upto F.Y.2016-17.

NPS offers following important features to help subscriber save for retirement:

  • The subscriber will be allotted a unique Permanent Retirement Account Number (PRAN). This unique account number will remain the same for the rest of subscriber's life. This unique PRAN can be used from any location in India.

PRAN will provide access to two personal accounts:

  • Tier I Account: This is a non-withdrawable account meant for savings for retirement.
  • Tier II Account: This is simply a voluntary savings facility. The subscriber is free to withdraw savings from this account whenever subscriber wishes. No tax benefit is available on this account.

Regulator and Entities for NPS:

Pension Fund Regulatory and Development Authority (PFRDA) : Pension Fund Regulatory and Development Authority (PFRDA) - External website that opens in a new window is an autonomous body set up by the Government of India to develop and regulate the pension market in India.

Point of Presence (POP) : Points of Presence (POPs) are the first points of interaction of the NPS subscriber with the NPS architecture. The authorized branches of a POP, called Point of Presence Service Providers (POP-SPs), will act as collection points and extend a number of customer services to NPS subscribers. The Pension Fund Regulatory and Development Authority (PFRDA) - External website that opens in a new window has authorized 58 institutions including public sector banks, private banks , private financial institutions and the Department of Posts - External website that opens in a new window as Points of Presence (POPs) for opening the National Pension System (NPS) accounts of the citizens.

Central Recordkeeping Agency (CRA) : The recordkeeping, administration and customer service functions for all subscribers of the NPS are being handled by the National Securities Depository Limited (NSDL) - External website that opens in a new window , which is acting as the Central Recordkeeper for the NPS.

Annuity Service Providers (ASPs) : Annuity Service Providers (ASPs) - External website that opens in a new window would be responsible for delivering a regular monthly pension to the subscriber after exit from the NPS.

Benefits of NPS

Some of the benefits of the National Pension System (NPS) are:

  • It is transparent - NPS is transparent and cost effective system wherein the pension contributions are invested in the pension fund schemes and the employee will be able to know the value of the investment on day to day basis.
  • It is simple - All the subscriber has to do, is to open an account with his/her nodal office and get a Permanent Retirement Account Number (PRAN).
  • It is portable - Each employee is identified by a unique number and has a separate PRAN which is portable i.e., will remain same even if an employee gets transferred to any other office.
  • It is regulated - NPS is regulated by Pension Fund Regulatory and Development Authority - External website that opens in a new window, with transparent investment norms & regular monitoring and performance review of fund managers by NPS Trust - External website that opens in a new window.
Tax Benefits:

Tax Benefits

Presently, the tax treatment for contribution made in Tier I account is Exempted-Exempted-Taxed (EET) i.e., the amount contributed is entitled for deduction from gross total income upto Rs.1.00 lakh (along with other prescribed investments) as per section 80C (as per the provisions of the Income Tax Act, 1961 as amended from time to time).

The appreciation accrued on the contribution and the amount used by the subscriber to buy the annuity is not taxable. Only the amount withdrawn by the subscriber after the age of 60 is taxable.


All the charges associated to Tier I account including Annual PRA Maintenance charge are paid by the employer. In case of Tier II account, activation charge and transaction charges are paid by the subscriber.

The POP charges and the CRA charges are given in the table below:

IntermediaryCharge headService charges*Method of Deduction
CRA PRA Opening charges Rs.50 Through cancellation of units at the end of each quarter.
Annual PRA Maintenance cost per account Rs.190
Charge per transaction Rs.4
(Maximum Permissible charge for each subscriber)
Initial subscriber registration Rs.100 To be collected upfront
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 Rs.20

*Service tax and other levies, as applicable, will be levied as per the existing tax laws.