NPS on Coin (Zerodha)
Zerodha’s Coin platform provides access to the National Pension System (NPS), a government-sponsored defined-contribution pension scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). NPS allows Indian citizens between 18 and 70 years of age to build a retirement corpus through regular contributions to market-linked pension funds. Contributions qualify for tax deductions under Sections 80CCD(1), 80CCD(1B), and 80CCD(2) of the Income Tax Act, 1961.
Zerodha acts as a Point of Presence (PoP) registered with PFRDA, enabling it to onboard new NPS subscribers and accept contributions through the Coin interface.
What is NPS
NPS is a defined-contribution scheme where the pension benefit depends on the accumulated corpus and returns generated by the pension fund, unlike defined-benefit government pension schemes. NPS has two tiers:
- Tier I: The primary pension account with restrictions on withdrawal until age 60. This is the mandatory account for tax benefit purposes.
- Tier II: A voluntary savings account with no withdrawal restrictions; contributions to Tier II do not attract 80C or 80CCD deductions (except for Central Government employees under a specific notification).
NPS is open to all Indian citizens including those employed in private sector, self-employed individuals, and government employees. NRI (Non-Resident Indian) subscribers can also open NPS accounts.
NPS on Zerodha Coin: account opening
Opening an NPS account through Coin:
- Navigate to the NPS section within the Coin platform.
- Verify Aadhaar-linked eKYC (using Aadhaar OTP or Digilocker integration).
- Select the Pension Fund Manager (PFM).
- Choose asset allocation (Active choice or Auto choice).
- Submit initial contribution (minimum Rs 500 for Tier I, Rs 1,000 for Tier II).
- A Permanent Retirement Account Number (PRAN) is generated by CRA (Central Recordkeeping Agency, operated by NSDL e-Governance Infrastructure or CAMS).
The PRAN is portable; if the subscriber changes PoP from Zerodha Coin to another PoP, the PRAN and accumulated corpus are transferred without tax consequences.
Pension Fund Managers
PFRDA-registered Pension Fund Managers (PFMs) available for NPS subscription through Coin include:
- SBI Pension Funds
- LIC Pension Fund
- UTI Retirement Solutions
- HDFC Pension Management
- ICICI Prudential Pension Fund
- Kotak Pension Fund
- Aditya Birla Sun Life Pension Management
- Axis Pension Fund
- Tata Pension Management
- Max Life Pension Fund Management
Each PFM manages a set of fund options under the NPS framework. The performance of each PFM’s funds is publicly reported on the NPS Trust website (npstrust.org.in).
Asset classes and allocation
NPS offers four asset classes:
| Asset Class | Description | Maximum allocation |
|---|---|---|
| E (Equity) | Index funds tracking Nifty 50 and Sensex | 75% (Active choice; reduces to 50% from age 50 under auto choice) |
| C (Corporate Bonds) | Investment-grade corporate bonds | 100% |
| G (Government Securities) | G-Secs and SDLs | 100% |
| A (Alternative Assets) | REITs, InvITs, CMBS | 5% (capped by PFRDA) |
Active choice
In Active Choice, the subscriber manually allocates percentages to each asset class (subject to the caps above). This allows equity-heavy allocation for younger subscribers and gradual shift to bonds as retirement approaches.
Auto choice
Auto Choice (Lifecycle Fund) automatically adjusts allocation based on the subscriber’s age:
- Aggressive Lifecycle Fund (LC-75): 75% equity until age 35; gradually shifts to 15% by age 55.
- Moderate Lifecycle Fund (LC-50): 50% equity until age 35.
- Conservative Lifecycle Fund (LC-25): 25% equity allocation.
Auto Choice is recommended for subscribers who do not wish to actively manage allocation.
Contributions and charges
Annual contribution minimum
- Tier I: Minimum Rs 1,000 per year. Accounts with insufficient annual contributions may be frozen; reactivation requires payment of Rs 100 penalty per year of default plus the minimum contribution.
- Tier II: No mandatory annual minimum after initial contribution.
Contribution method through Coin
Contributions can be made through:
- Net banking.
- UPI.
- Debit card.
Zerodha Coin does not auto-debit NPS contributions; the subscriber must initiate each contribution manually.
Charges
| Charge | Amount |
|---|---|
| PoP charges (Zerodha Coin) | 0.50% of contribution (maximum Rs 25,000 per transaction; minimum Rs 20) |
| CRA maintenance charge | Rs 57 per year (NSDL) or Rs 95 per year (CAMS) |
| PFM investment management fee | 0.01% per annum of AUM (regulatory cap) |
| Custodian charge | 0.005% per annum of AUM |
NPS charges are among the lowest in the financial services industry globally. The PFM investment management fee cap of 0.01% per annum is a fraction of mutual fund TERs.
Tax benefits
Section 80CCD(1)
Contributions to NPS Tier I qualify for deduction under Section 80CCD(1) up to:
- 10% of salary (basic + DA) for salaried employees.
- 20% of gross total income for self-employed individuals. This deduction is part of the overall Rs 1,50,000 limit under Section 80CCE (which includes Section 80C and 80CCD(1)).
Section 80CCD(1B)
An additional deduction of Rs 50,000 per year for NPS Tier I contributions is available under Section 80CCD(1B), over and above the Rs 1,50,000 Section 80C limit. This makes the maximum NPS-related deduction (including Section 80CCD(1)) potentially Rs 2,00,000 for salaried employees.
Section 80CCD(2)
Employer contributions to an employee’s NPS Tier I account are deductible up to 14% of salary (basic + DA) for Central Government employees and 10% for private sector employees, without any monetary cap. Employer NPS contribution is not included in the Section 80CCE limit.
New tax regime
Under the new tax regime (Section 115BAC, applicable from FY 2024-25 onwards), Section 80CCD(1) and 80CCD(1B) deductions are not available. Only the employer contribution deduction under Section 80CCD(2) remains available under the new tax regime. Investors on the new regime should weigh NPS tax benefits carefully.
Withdrawal rules
At retirement (age 60)
At age 60, the subscriber can:
- Withdraw up to 60% of the corpus as a lump sum; this is fully tax-exempt.
- Use the remaining 40% (minimum) to purchase an annuity from a PFRDA-registered annuity service provider. The annuity income is taxable at slab rate.
Premature exit (before age 60)
Premature exit is permitted after 10 years of NPS contribution:
- Lump-sum withdrawal: Maximum 20% of corpus (taxable).
- Minimum 80% must be annuitised.
Partial withdrawal
After 3 years of NPS Tier I account opening, partial withdrawals of up to 25% of own contributions are permitted for specific purposes: higher education of children, marriage, house purchase, or treatment of specified illnesses. Maximum three partial withdrawals in the subscriber’s lifetime.
References
- PFRDA, NPS Subscriber Registration and Operations Manual.
- PFRDA Circular, PoP charges and service standards.
- Income Tax Act, 1961, Sections 80CCD(1), 80CCD(1B), 80CCD(2), 115BAC.
- NPS Trust, Pension Fund Manager performance data (npstrust.org.in).
- Finance Act, 2024, NPS partial withdrawal tax exemption amendment.