TIPS 13 on National Pension System(NPS)
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1. New Pension Scheme became operational from 01.01.2004.
Previously it was termed as New Pension Scheme and now it is termed as National Pension System. |
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2. What is the full form of the following regarding NPS?
ASP - Annuity Service Provider (IP 2023) CRA - Central Record Keeping Agency (IP 2023) KYC - Know Your Customer (IP 2023) PFRDA- Pension Fund Regulatory and Development Authority (IP 2023) PFM -Pension Fund Managers POP - Point of Presence (IP 2023) |
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3. Write short notes on Tier-I and Tier-II of National Pension System.
Answer: NPS will have two tiers namely Tier-I and Tier-II. Contribution to Tier-I is mandatory for all Government servants joining on or after 01.01.2004 whereas Tier-II will be optional and at the discretion of the Govt. servants. |
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4. Write short notes on “Tier-I of National Pension System”.
Answer: (a) Government servant can exit at or after 60 years of age from Tier-I. (b) 40% of Pension wealth mandatory for investment at exit. (c) This will provide for pension for lifetime of the pensioner and thereafter to his / her dependant. (d) To leave the scheme before 60 years of age, 80% of pension wealth mandatory for investment. |
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5. What is the amount of Tier –I Contribution to New Pension Scheme from 01.04.2019?
Answer: (a) Contribution from Government servant is 10% of Pay +DA (b) Contribution from Government is 14% of Pay +DA |
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6. Which is the Agency responsible for allotting and communicating Permanent Retirement Account Number (PRAN) to the PAOs? Answer: National Securities Depository Limited (NSDL) |
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7. In the beginning days of NPS, Permanent Pension Account Number (PPAN) was allotted. Now instead of PPAN, Permanent Retirement Account Number PRAN is being allotted. PRAN contains twelve digits number. (IP 2013) PRAN is allotted to its subscriber by Central Recordkeeping Agency. |
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8. When will be the first contribution of a Government servant towards National Pension System credited? Answer: The first contribution of the Government servant shall be credited in his individual Pension Account within 20 days of the date of submission of the application or by the last date of the month in which the Govt. servant joined whichever is later. |
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9. What are the items included in the expression ‘Emolument” for the purpose of the NPS ?
Answer: (i) Basic pay as defined in Rule 9 (21) (a) (i) of Fundamental Rules (ii) Non-Practising Allowance granted to Medical Officer in lieu of private practice (iii) Admissible Dearness Allowance |
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10. How will the contribution from a subscriber and contribution from the Government be credited in respect of a Government servant who is under suspension? Answer: (i) If a subscriber had been under suspension, the subsistence allowance drawn during the period of suspension in a calendar month shall be taken into account for emoluments. (ii)] Contribution may be made by the subscriber, at his option, during the period of suspension. (iii) In case the period of suspension or leave for which leave salary is payable, contribution to the NPS shall be determined based on the emoluments which the subscriber becomes entitled for the period of suspension. The difference of the amount of contribution to be deposited and the amount of contribution already deposited during the period of suspension, shall be credited to the Individual Pension Account along with the interest. (iv) In case of a subscriber under suspension, contribution shall be made by the Govt. on the basis of the emoluments determined by taking into account the subsistence allowance paid to the subscriber during suspension. Provided that no contribution shall be made by the Govt. during the period of suspension where the subscriber had opted not to pay his contribution during the suspension. |
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11. How will the contribution from a subscriber be credited during the period of absence from duty? Answer: No contribution shall be made by the subscriber during the period of absence from duty for which no pay or leave salary is payable. |
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12. How will the contribution from a subscriber and contribution from the Government be credited during the period of leave? Answer: Contribution from a subscriber: The subscriber will pay contribution based on the leave salary payable. If the subscriber is on extraordinary leave, there will be no leave salary. Hence there is no contribution in respect of Extra ordinary leave. Contribution from the Government: In cases the leave is granted on medical ground or due to his inability to join duty on account of civil commotion or for pursuing higher studies considered useful in discharge of his official duty and during such leave, leave salary is not payable or leave salary is payable at the rate which is less than full pay, the Government shall make contribution equal to 14% of the notional emoluments comprising of amount representing pay plus DA. |
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13. Write short notes on “Option facility to avail benefits on death or invalidation of the subscriber during service” Answer: (i) After issue of the notification of the CCS (Implementation of National Pension System) Rules, 2021, all officials who are covered under the NPS are asked to exercise an option in Form 1 for availing benefits under NPS or CCS (Pension ) Rules, 1972 in the event of death or retirement on invalidation. (ii) One copy of the option form is kept in the Service Book and another copy will be forwarded to the Central Record Keeping Agency by the Head of Office. [Rule 10 of the CCS (Implementation of NPS) Rules, 2021] |
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14. What are the entitlement of family on death of a Government servant in case of employees covered under NPS? Answer: Entitlement of family on death of a Government servant in case Of Employees covered under NPS (A) Employee opted for Old Pension Scheme:- (i) Family Pension, Death gratuity, Leave encashment, Benefits from CGEGIS are the same as per Old Pension Scheme. |
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(ii) Government’s contribution to NPS and returns thereon shall be transferred to Government account. Employees’ contribution to NPS and returns thereon shall be paid to the family. (B) Benefits based on the NPS Corpus will be available Concerned office would take action to close PRAN under NPS of the deceased Government servant and grant benefits of lump sum amount (maximum of 20% of accumulated pension wealth) and annuity from the remaining pension wealth to the eligible family member from Annuity Service Provider registered with PFRDA, in accordance with PFRDA (Exists and Withdrawal under NPS) Regulations, 2015
All benefits like Death gratuity, Leave encashment, Benefits from CGEGIS are the same as per Old Pension Scheme. |
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15. Kindly intimate whether balance amount after purchase of Annuity, can be deferred for further period?
Answer: Balance amount after purchase of Annuity, can be deferred up to 75 years provided he should intimate the Authority 15 days before superannuation retirement date. (Defer means the postponement of claim for receiving benefits admissible to the subscriber upon exit from NPS). |
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16. What is the procedure for deferring annuity purchase at the time of superannuation from NPS? Answer: The subscriber shall have the option to defer until the attaining the age of seventy-five years provided (i) the subscriber intimates his or her intention to do so in writing in the specified form, at least fifteen days prior to the attainment of age of superannuation to the Central Recordkeeping Agency.
(ii) It shall be the condition precedent to opt for such deferment of annuity purchase, that in case if the death of the subscriber occurs before such due date of purchase of an annuity after the deferment, the annuity shall mandatorily be purchased by the spouse providing for annuity for life of the spouse |
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17. Where the subscriber who, upon attaining the age of superannuation, then 40% out of accumulated pension wealth shall be mandatorily utilized for purchase of annuity. Kindly intimate whether the subscriber to NPS will have the option to withdraw the entire accumulated pension wealth without purchasing any annuity on superannuation? |
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Answer: Where the subscriber who, upon attaining the age of superannuation, then 40% out of accumulated pension wealth shall be mandatorily utilized for purchase of annuity. Then the subscriber to NPS will have the option to withdraw the entire accumulated pension wealth without purchasing any annuity on superannuation, if the accumulated pension wealth of the subscriber is equal to or less than Rs. five lakh. |
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18. Where the subscriber who, before attaining the age of Superannuation or voluntarily retires, then 80% out of accumulated pension wealth shall be mandatorily utilized for purchase of annuity. Kindly intimate whether the subscriber to NPS will have the option to withdraw the entire accumulated pension wealth without purchasing any annuity?
Answer: Where the subscriber who, before attaining the age of superannuation or voluntarily retires, then 80% out of accumulated pension wealth shall be mandatorily utilized for purchase of annuity. Then the subscriber to NPS will have the option to withdraw the entire accumulated pension wealth without purchasing any annuity if the accumulated pension wealth of the subscriber is equal to or less than two lakh and fifty thousand rupees |
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19. What is composition of PFRDA?
Answer: A Chairperson, 3 whole time members, 3 part time members (IP 2023) |
20. What are the conditions relating to NPS withdrawals? Answer: (i) NPS withdrawal is allowed but only after three years from the date of joining. (ii) Subscribers are permitted to withdraw not exceeding 25% of the contributions made only by subscriber. (IP 2023) (iii) The subscribers are allowed for partial withdrawal for the higher education of children, marriage of children, construction /purchase of flat (having no house previously) and for medical treatment for subscriber, spouse, children and dependent parents. (iv) Maximum of 3 withdrawals during entire tenure are allowed. (IP 2023) |
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21. Withdrawal from NPS is not allowed for which cause? Answer: For Foreign travel (IP 2023) |
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22. Which companies are empanelled under PFRDA as Annuity Service Providers (ASP)? Answer: (1) Life Insurance Corporation of India (2) SBI Life Insurance Co. Ltd. (3) ICICI Prudential Life Insurance Co. Ltd (4) HDFC Standard Life Insurance Co. Ltd (5) Star Union Dal- ichi Life Insurance Co. Ltd Subject to change from time to time |
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23.What are the statements about NPS regarding Tier-I and Tier-II?
Answer: (a) A subscriber can continue his Tier-I account even after closure of Tier-II account. (b) A subscriber cannot continue his Tier-II account after closure of Tier-I account. Upon exit from Tier-I account, the Tier-II account gets closed automatically. |
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24. One way switch feature in an NPS account allows transfer of funds from Tier-II to Tier-I account. (IP 2023) |
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25. What are the annuity options available to a subscriber under NPS? Answer: The following are the most common variants that are available: (i) Default Annuity Scheme: Annuity for life of the subscriber and his spouse with the provisions for return of purchase price of the annuity:- After the demise of the subscriber and his spouse , the annuity will be re- issued to the family members in the order specified thereunder: (a) living dependent father (b) living dependent mother. After the coverage of all the family members specified above, the purchase price shall be returned to the surviving children of the subscriber or legal heirs as may be applicable.
(ii) Annuity for life with the provisions for return of purchase price to the nominee:- Employee shall get annuity (monthly pension) till he is alive and the payment of the annuity ceases on the on the death. Then the purchase price is returned to the nominee.
(iii) Annuity for life: Employee shall get annuity (monthly pension) till he is alive and the payment of the annuity ceases on the on the death. There will be no payment of the purchase price to the nominee. All ASPs may not provide all the variants. It may vary ASP to ASP. Pricing of annuity also varies ASP to ASP. (ASP- Annuity Service Provider) 26 What are the Tax benefits under National Pension Scheme? Answer: The Tax benefits under National Pension Scheme:- (i) Employees’ contribution of NPS up to 10 percent of salary (Pay+DA) under Section 80-CCD-(1) which is capped at Rs. 1,50,000/- under Section 80-C. The above restriction is given under Section 80-CCE of the IT Act, 1961.
(ii) Govt.’s Contribution to NPS -14% of salary (Pay+DA)-Section 80- CCD-(2) (iii) An additional tax deduction over and above Rs. 1,50,000/- in NPS under Section 80 CCD (1-B). Any citizen of India including persons covered under Old Pension Scheme can open NPS account on voluntary basis and avail of the tax benefits by contributing to NPS subject to maximum of Rs. 50,000/-. (iv) Amount of partial withdrawal is tax free. (v) In case of superannuation, 40% lumpsum withdrawal is tax free. (vi) Annuity utilized for purchase of annuity is not taxable in the hands of the subscriber.
27. There is no tax benefits on contribution Tier-II NPS Account. (IP 2023) 28. What are the functions of the Central Record Keeping Agency (CRA) and National Securities Depository Limited (NSDL)?
Answer: (i) Central Record Keeping Agency (CRA) is the part of the Postal Accounts Office like Accounts Branch in a Head Office. It is a compulsory unit of a Postal Accounts Office.
(ii) National Securities Depository Limited (NSDL) is a private organisation functioning in Mumbai undertaking NPS related works in respect of all Postal Accounts Offices in India.
(iii) CRA forwards all data to NSDL electronically keeping all documents in the CRA.
(iv) NSDL communicates only PRAN number to the concerned CRA. All other information will not be communicated to the CRA. NSDL will communicate all other items directly to the subscribers such as payment of Annuity and claim settlement through Head Office.
(v) Subscribers cannot communicate NSDL directly. Subscribers forward their grievances to the Postal Accounts Office through Divisional Head. Postal Accounts Office (CRA) will forward the grievances to NSDL for settlement.
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