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National Pension Scheme

Topics Covered:

  1. Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
  2. Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections.


National Pension Scheme


What to study?

  • For Prelims: Key features, objectives of the scheme.
  • For Mains: Significance of the scheme and its role in ensuring financial security of the citizens.


Context: The government has approved a slew of measures under the National Pension Scheme (NPS).


Changes approved in the National Pension System:

  • Mandatory contribution by the Central Government enhanced by 4 percent from the existing 10 percent to 14 percent for employees covered under NPS Tier-I
  • Central government employees will be provided with freedom of choice for selection of Pension Funds and pattern of investment.
  • Payment of compensation for non-deposit or delayed deposit of NPS contributions during 2004-2012
  • Contribution by Government employees under Tier-II of NPS will now be covered under Section 80 C for deduction up to Rs 1.50 lakh for the purpose of income tax at par with schemes such as General (PF), Contributory PF, Employees PF and Public PF, with lock-in period of 3 years.
  • The entire withdrawal will now be exempt from income tax as the tax exemption limit for lump sum withdrawal on exit has been enhanced to 60 percent.



The move is set to benefit around 36 lakh subscribers, including approximately 18 lakh Central government employees covered under NPS. It will cost the exchequer Rs 2,840 crore in the current financial year.


What is National Pension System (NPS)?

National Pension System (NPS) is a government-sponsored pension scheme. It was launched in January 2004 for government employees. However, in 2009, it was opened to all sections.

  • The scheme allows subscribers to contribute regularly in a pension account during their working life. On retirement, subscribers can withdraw a part of the corpus in a lumpsum and use the remaining corpus to buy an annuity to secure a regular income after retirement.
  • This system is managed by PFRDA (Pension Fund Regulatory and Development Authority).


Who can join NPS?

Any Indian citizen between 18 and 60 years can join NPS. The only condition is that the person must comply with know your customer (KYC) norms.


Can a Non Resident Indian (NRI) join NPS?

Yes, an NRI can join NPS. However, the account will be closed if there is a change in the citizenship status of the NRI.


Sources: the hindu.