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An individual has to subscribe NPS account through the authorized Point of Presence (Bank) and remit the subscription regularly.

The remitted contribution amount will be pooled in a pension fund.

These funds are being invested by PFRDA regulated professional Fund Managers as per the approved investment guidelines in the diversified portfolios comprising of Equity (Shares), Government Bonds, Bills, Corporate Debentures, etc.

These contributions would grow and accumulate over the years and the returns will be earned according to the investment made.

At the time of a normal exit from NPS, the subscribers may use the accumulated Pension Wealth under the scheme either to purchase a life annuity from a PFRDA empanelled life insurance company or withdraw a part amount of the accumulated pension wealth as lump-sum, if they choose to do so.

Tamilnad Mercantile Bank Ltd., was appointed by PFRDA to act as one of the Point of Presence (POP) for the NPS. Presently, all our branches are designated to carry out the NPS activities as Point of Presence- Service Providers (POP-SP).

NPS Tier-I offers attractive tax benefits and retirement savings advantages. Salaried individuals can claim deductions up to 10% of salary, while self-employed individuals can claim up to 20% of gross income under applicable tax provisions. An additional tax deduction of ₹50,000 is available under Section 80CCD(1B). Employer contributions up to 14% of salary may also qualify for tax benefits. Partial withdrawals up to 25% of own contributions are tax-free subject to conditions. At retirement, up to 60% of the accumulated corpus can be withdrawn tax-free, while annuity purchase is tax exempt at the time of purchase.

Tax benefits are subject to applicable Income Tax laws and amendments issued from time to time.

NPS offers a range of investment options and choice of Pension Fund Manager (PFMs) for planning the growth of your investments in a reasonable manner. Any individual can switch over from one investment option to another option or one fund manager to another fund manager subject to the certain regulatory restrictions. The returns are totally market based and the subscriber has the flexibility to choose any of the following Fund Managers:

•    LIC Pension Fund Limited
•    SBI Pension Funds Pvt. Limited
•    UTI Pension Fund Limited
•    HDFC Pension Fund Management Limited
•    ICICI Pension Fund Management Limited
•    Kotak Mahindra Pension Fund Limited
•    Aditya Birla Sun Life Pension Fund Management Limited
•    TATA Pension Fund Management Private Limited
•    Axis Pension Fund Management Limited
•    DSP Pension Fund Managers Private Limited

The earlier terminology of “Active Choice” and “Auto Choice” is now subsumed under Common Schemes (CS). Under Common Schemes, the subscriber has the following options  -

1. Active Choice

In Active Choice, subscribers have the flexibility to allocate their investments across various asset classes, adhering to the investment caps set by the Pension Fund Regulatory and Development Authority (PFRDA). Subscribers can decide how their contributions are invested based on personal preferences. They must select the Pension Fund, Asset Class, and the percentage allocation for each asset class within a scheme.

Asset Classes in Active Choice

Subscribers can allocate investments among four asset classes:
  •    Equity (E): Equity and related instruments
  •    Corporate Debt (C): Corporate debt and related instruments
  •    Government Bonds (G): Government bonds and related instruments
  •    Alternative Investment Funds (AIF): Including CMBS, MBS, REITS, AIFs, InvITs, etc.

Under active choice, a subscriber can select single or multiple asset class under a single Pension Fund with a specific cap as mentioned below:
  •    Equity (E): Up to 75%
  •    Corporate Bonds (C): Up to 100%
  •    Government Securities (G): Up to 100%
  •    Alternative Investment Funds (AIF): Up to 5%
The total allocation across all asset classes (E, C, G, and A) cannot exceed 100%.

2. Auto Choice

For subscribers who prefer not to manage their investments, NPS offers Auto Choice. This option invests contributions in a life-cycle fund, where the allocation across asset classes changes with the subscriber's age.

Types of Auto Choice Funds
  •    Life Cycle 25 – Low (5E/55Y) 
  •    Life Cycle 50 – Moderate (10E/55Y)
  •    Life Cycle 75 – High (15E/55Y)
  •    Life Cycle – Aggressive (35E/55Y) (formerly Balanced Life cycle Fund)

Under the National Pension System (NPS), there are two types of accounts available to subscribers:

Tier I Account – Individual Pension Account

• Default pension account under NPS
• Treated as a retirement savings account
• Withdrawals allowed in accordance with Pension Fund Regulatory and Development Authority (Exits and Withdrawals under the National Pension System) Regulations, 2015 and amendment issued thereunder
• Eligible for tax benefits under the Income Tax Act, 1961

Tier II Account – Optional Investment Account

• Available only to subscribers with an active Tier I account
• No restrictions on withdrawals - At any time the subscriber can withdraw
• It’s an investment account and not eligible for tax benefits

Note:

• NRIs/OCIs with Tier I accounts are not permitted to activate Tier II account
• Subscribers may choose different Pension Funds and Investment Options for Tier I and Tier II accounts

To open an Individual Pension Account under NPS, the subscribers are required to submit the Subscriber Registration Form (CSRF/NRSF/online format) along with the following documents via physical or online mode:

For Resident Individuals: 
•    One recent photograph 
•    PAN Card 
•    Proof of Address

For Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs):

Documents Required for NPS Enrolment
 

Refer to the subscriber registration form for the full list of acceptable proofs.

Details of minimum contribution and charges -

•    Once application is processed by Central Record keeping Agency (CRA), subscriber will be allotted with Permanent Retirement Account Number (PRAN). After allotment of PRAN, the subscriber can also contribute through online or through branch.

Tier – 2 Activation Details:
•    If the subscriber who is having Tier-I account wants to activate Tier 2 account, can activate through online  or through branch.

Modification in details of NPS:

If customer wants to modify the details like Mobile No, E-Mail ID, Address, Nomination, Bank Account Details Update ,Scheme Preference, Pension Fund Manager, Reprint of PRAN Card, I-Pin/T-Pin request, Tire II Activation/modification they can modify either through online by logging into respective CRA website or through branch by submitting modification application.

If subscriber wants to modify any details like name, father name, Date of Birth, Signature, KYC Details Correction etc. should contact their branch and submit the modification application.
 

Withdrawal and Exit under NPS Common Scheme (CS) and MSF

A. Normal withdrawal (Superannuation Exit)

Vesting period → 15 years or any higher period stipulated under a scheme; or till 60 years of age (whichever is earlier).

a)  Total  Corpus – Rs.8 lakh or less
100%  withdrawal in a lumpsum or Systematic Withdrawal (SWL)/ Systematic Unit Redemption (SUR)
                         (or) 
    Up to 80% lumpsum & At least 20% annuity

b) Total Corpus between Rs.8 lakh to Rs.12 lakh

    Up to ₹6 lakh as lumpsum and balance as SUR for min. 6 years or annuity.
                       (or) 
    Up to 80% lumpsum & At least 20% annuity

c) Total Corpus above Rs.12 Lakh

Up to 80% lumpsum & At least 20% annuity

B. Premature Exit:

No Vesting Period

a)Total  Corpus  Rs.5 lakh or less

    100% lumpsum or Systematic Withdrawal (SWL)/ Systematic Unit Redemption (SUR)
            (or) 
        Up to 20% lumpsum & At least 80% annuity

b) Total Corpus above ₹5 lakh:

        Up to 20% lumpsum & At least 80% annuity

C. Exit due to Death:

•    The entire accumulated pension wealth (100%) of the subscriber will be paid to the nominee or legal heirs. If the nominee/legal heir wishes to opt for annuity (pension) or SLW or SUR or other approved options.

D. Partial Withdrawal

•    For the first partial withdrawal, a subscriber may withdraw up to 25% of own contributions, excluding any appreciation or returns thereon.

•    For subsequent partial withdrawals, a subscriber may withdraw up to 25% of the incremental own contributions made after the previous partial withdrawal, excluding any appreciation or returns thereon.

•    First conditional withdrawal will be allowed after completion of 3 years in NPS

i)    Before 60 years age: Frequency: 4 times; Interval: 4 years between Partial Withdrawals

ii)    Post 60 years age: Frequency: unlimited; Interval: 3 years between Partial Withdrawals
 

•    Subscribers can join the NPS up to the age of 85 years

•    They can continue of defer their NPS Account up to the age of 85 years.
 

Exit

No Vesting Period

a)    Total  Corpus ₹12 lakh or less

100% lumpsum or Systematic  Withdrawal (SWL)/ Systematic Unit Redemption (SUR)
        (or) 
    Up to 80% lumpsum & At least 20% annuity

b) Total  Corpus above  ₹12 lakh

    Up to 80% lumpsum & At least 20% annuity

In case of unfortunate death of the subscriber, the entire accumulated pension wealth (100%) of the subscriber will be paid to the nominee or legal heirs. If the nominee/legal heir wishes to opt for annuity (pension) or SLW or SUR or other approved options.