National Pension Scheme

The National Pension Scheme (NPS) is a defined contribution based pension system launched by Pension Fund Regulatory and Development Authority (PRFDA) of the Government of India to provide retirement income to citizens.
Subscribers are issued a unique 12-digit Permanent Retirement Account Number (PRAN) and choose to invest their money in one of these accounts:
  • Tier I: Non-withdrawal account. Income tax benefits per the Income Tax Act, 1961 are available for both employer and employee contributions.
  • Tier II: Voluntary savings facility. Subscriber can use the Fund Management facility at a low cost. Subscriber can withdraw savings at any time. Tax benefits are not applicable.

Employees can invest in both accounts if they provide at least the minimum contributions for each account. The Tier I account has a tax benefit for income tax and the Tier II account does not have a tax benefit for income tax.

Contributions made by the employee and employers are flexible. The organization sets the percentage of contributions that are deducted from the employee and employer accounts using the benefits module. Benefits deduction setup is used to implement the National Pension Scheme. NPS has a benefit plan type of Defined Contribution and contribution type of Match Percent Schedule. Eligible employees can enroll and have their deductions sent to payroll for processing.

Note: The resource's Nationality Country and Home Country must be India. The Other Amount field will not be populated and an error log is created, if the resource's Nationality Country and Home Country is India and these situations apply:
  • Current Employee Pay Element record does not match the Pay Element at Basis of Contribution Setup
  • Current Employee Pay Element record that matches the Pay Element at Basis of Contribution Setup is inactive
  • Current Employee Pay Element record matches the Pay Element at Basis of Contribution Setup but date range is not within the Basis of Contribution Setup
Complete these tasks in this order to set up NPS and to determine the employee contribution for NPS:
  1. Configure the Basis of Contribution Setup (Setting up Basis of Contribution for NPS).
  2. Run Calculate Basis of Contribution, selecting National Pension Scheme in the Basis Of Contribution field (Calculating Basis of Contribution for Superannuation).
  3. Create Deduction Code (Creating deduction codes for NPS).
  4. Create Benefit Plan for National Pension Scheme (Creating benefit plans for NPS).
  5. Check and correct errors (Administrator > Payroll > Basis Of Contribution Errors > National Pension Scheme tab).
  6. Enroll the resource in the National Pension Scheme and verify the deduction record (Enrolling resources in NPS).

Updates to NPS subscriber contributions

You must update the National Pension Scheme contribution when these circumstances occur for resources that are subscribers of NPS:
  • Change on Pay Rate (Active Primary Work Assignment)
  • Change on Current Employee Pay Element (defined at Basis of Contribution Setup)
  • Change on the Basis of Contribution Setup
To correct the amount of the resource contribution for NPS, complete these tasks in this sequence:
  1. Re-calculate Basis of Contribution (Setting up Basis of Contribution for NPS)
  2. Select Administrator > Resource > Other Amount field and verify that the appropriate Other Amount field shows the updated salary and other compensation such as Dearness allowance.
  3. Update the resource and process the change (Updating employee enrollments)
  4. Interface the employee deduction export record to HRM (Interfacing NPS employee contributions to HRM)