Rule 13 — NPS Rules
Original Rule Text
13. The subscriber to the scheme will have Tier-I and also have option to open another account Tier-II. Both tier-I (Retirement/Pension Account) and Tier II (Savings/Investment Account) are pure retirement savings products. Tier-I is a non-withdrawable account while Tier-II is a withdrawable account to meet financial contingencies. Government servants to make a contribution of 10% of his basic pay (i.e Level Pay) plus Dearness Allowance, every month. From 01.04.2019, 14% contribution is made by the Government. In case a subscriber is posted in Foreign Service the contribution is to be made based on presumptive pay, i.e. the pay she would have earned had she continued in her parent office, however in case of deputation, the subscription would be based on the deputation pay. For an employee under suspension, the subscription is based on the subsistence allowance (it is as per option of the subscriber.
What This Means
Every NPS subscriber automatically has a Tier-I account, which is the core pension account. They also have the option to open a Tier-II account, which functions like a savings account. Both are retirement savings products, but they work very differently: Tier-I cannot normally be withdrawn from before leaving government service, while Tier-II can be accessed at any time for financial contingencies.
Government servants contribute 10% of basic pay (Level Pay) plus Dearness Allowance each month. From 1 April 2019, the government's matching contribution was raised from 10% to 14%. For employees on foreign service, contributions are based on the presumptive pay — what they would have earned had they stayed in the parent office. For employees on deputation, the actual deputation pay is used. For employees under suspension, the subsistence allowance is the basis for contribution, at the subscriber's option.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Tier-I is a mandatory, non-withdrawable pension account for all NPS subscribers.
- 2Tier-II is an optional, withdrawable savings account — can be opened only if Tier-I exists.
- 3Employee contribution: 10% of basic pay + Dearness Allowance per month.
- 4Government contribution: 14% of basic pay + DA (enhanced from 10% with effect from 01.04.2019).
- 5Foreign service: contributions based on presumptive pay (pay in parent office).
- 6Deputation: contributions based on actual deputation pay.
- 7Suspension: contributions based on subsistence allowance (at subscriber's option).
Practical Example
Deepak Mishra, a Deputy Secretary posted in New Delhi, draws a basic pay of Rs 70,000 and DA at 50% (Rs 35,000). His monthly NPS contribution is 10% of Rs 1,05,000 = Rs 10,500. His employer (government) contributes 14%, i.e., Rs 14,700. Together, Rs 25,200 goes into his PRAN every month.
Deepak is later deputed to a PSU where he gets a deputation pay of Rs 80,000. His NPS contributions are now recalculated on Rs 80,000 (plus applicable DA), not on his presumptive pay. Had he been sent on foreign service instead of deputation, contributions would be on presumptive pay (what he would have earned in Delhi).
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
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This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.