National Pension Scheme - Eligibility & Application

National Pension scheme is a pension scheme sponsored by the Government wherein an eligible citizen can contribute to a pension account on a regular basis to receive benefits after retirement. National Pension Scheme was launched in January 2004 and was made available to citizens of all sections between the age of 18-60 from 2009. The main objective of the National Pension Scheme is to ensure that the citizens earn a decent return on investments after their retirement.

Types of National Pension Scheme

The NPS offers two types of accounts:

Tier-I NPS Account- this type of pension is a basic type of pension account with withdrawal limitations.
Tier-II NPS Account- the withdrawals are not limited in this voluntary savings option.

Eligibility for NPS Scheme

National Pension Scheme is open to all Indian citizens, both residents and NRIs. Nevertheless, the below-listed eligibility criteria should be met:

The subscriber should be at least 18 years old and less than 65 years of age at the time of application.
The applicant should be mentally healthy.
The rules and conditions of KYC (know your customer) listed on the registration form should be adhered to by the subscriber before signing the form.

Required Documents to apply for National Pension Scheme:

In order to submit an NPS Scheme application, the following documents are required:

Subscriber registration form.
Photo ID proof.
Proof of Date of Birth (DOB).
Proof of residence.

Steps to Join NPS Scheme:

Step 1: Obtain a Permanent Retirement Account Number (PRAN) application form. It is available at any of the Point of Presence – Service Providers (POP-SP) and is available online from the NPS official website . The applicant should make sure that the details are filled correctly. A copy of PRAN application is reproduced below:

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Step 2: Submit PRAN application form at the nearest Point of Presence- Service Provider (POP-SP). Step 3: Track the PRAN application using the link: https://cra-nsdl.com/CRA/pranCardStatusInput.do Step 4: Submit the first contribution slip. A minimum of Rs. 500 should be contributed at the time of applying for registration. In addition, an NCIS (instruction slip) should be submitted, stating the details of the payment made towards the PRAN account. Know more about PRAN Card.

Partial Withdrawal from National Pension Scheme

According to the Pension laws, withdrawal is not allowed until maturity, i.e., until the retirement age. Unlike other pension plans, National Pension Scheme allows partial withdrawals, but only for specific reasons (medical issues, for higher education/marriage of children). The Pension Fund Regulatory and Development Authority (PFRDA) has decided that the NPS subscribers will now be permitted to make partial withdrawals to attain new skills or improve one’s employability by acquiring a technical or professional qualification.

Starting a new business is also included. In accordance with the PFRDA, partial withdrawals under specific circumstances as specified in such regulations is eligible for subscribers who have subscribed to this scheme at least for a period of three years from the date of joining and can withdraw for a maximum of 3 times during the advancing period. Earlier, a withdrawal can be done only after 10 years. Partial withdrawals from National Pension Scheme U/s 10(12A) refers to the relief made by the Pension Fund and Regulatory Development Authority (PFRDA) by easing the norms for partial withdrawal. The pensioner, on attaining the age of 60 is admissible to withdraw 60% of his contribution and the balance 40% must be utilized to buy an annuity. If the subscriber exits before the maturity, only 20% of the contribution is allowable to be withdrawn, the balance of which is taxable. Amendments to Section 10 of the Income Tax Act were made by inserting a clause 12A which proposed that on the closure of the account or opting out of the scheme; the payable amount would be exempted from tax if the amount is within 40% of the contribution. Besides the existing provision of section 10(12A) of Income Tax Act, 1961 that offers a tax-exempt up to 40% of total amount payable to him, further reliefs to the subscribers of the National Pension Scheme were also made on partial withdrawals by inserting a new clause (12B) to section 10 of the Income Tax Act. However, partial withdrawal is related to the contribution of the subscriber. This relief proposes that the amount withdrawn by the pensioner is tax-free if it does not exceed 25% of the total contribution. Further relaxations were also made in addition to this.

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Frequently Asked Questions

Common questions about National Pension Scheme: Eligibility, Types & Application.

The National Pension Scheme is a government-sponsored pension scheme wherein eligible citizens can contribute to a pension account regularly to receive benefits after retirement. It was launched in 2004 to ensure that citizens earn a decent return on their investments after retiring.

All Indian citizens, both residents and NRIs, are eligible for the NPS, provided they are at least 18 years old and less than 65 years of age at the time of application. Additionally, the applicant should be mentally healthy and adhere to the KYC (Know Your Customer) rules and conditions listed on the registration form.

The NPS offers two types of accounts: Tier-I NPS Account, which is a basic pension account with withdrawal limitations, and Tier-II NPS Account, which is a voluntary savings option with no withdrawal restrictions.

To apply for the NPS, you need to submit a subscriber registration form, photo ID proof, proof of date of birth, and proof of residence.

To apply for the NPS, you need to obtain a Permanent Retirement Account Number (PRAN) application form, fill it out correctly, and submit it at the nearest Point of Presence – Service Provider (POP-SP). You also need to make an initial contribution of at least Rs. 500.

Yes, partial withdrawal is allowed from the NPS, but only for specific reasons, such as medical emergencies, higher education or marriage of children, acquiring new skills or qualifications, and starting a new business.

To be eligible for partial withdrawal from the NPS, the subscriber must have contributed to the scheme for at least three years and can withdraw a maximum of three times during the tenure. Earlier, withdrawal was allowed only after 10 years.

According to Section 10(12A) of the Income Tax Act, the amount withdrawn on closure or opting out of the NPS is tax-exempt up to 40% of the total contribution. Additionally, Section 10(12B) provides tax exemption for partial withdrawals up to 25% of the total contribution.

Yes, NRIs (Non-Resident Indians) are eligible to contribute to the National Pension Scheme, provided they meet the age and other eligibility criteria.

The status of the PRAN (Permanent Retirement Account Number) application can be tracked online using the link https://cra-nsdl.com/CRA/pranCardStatusInput.do provided by the NPS.