Central autonomous body staff on NPS get six investment choices: PFRDA's July 2026 LC75 and Aggressive auto-choice expansion

Staff of Central Autonomous Bodies (CABs) who are enrolled in the National Pension System (NPS) now have six investment options instead of four. PFRDA Circular No. PFRDA/2026/39/SUP-CGSG/01, dated 9 July 2026 and titled "Enhancement of Investment Choice Options under NPS for subscribers of Central Autonomous Bodies (CABs)", adds two Auto Choice life-cycle funds: LC75 (High) and Life Cycle Aggressive. The circular is signed by Vikas Kumar Singh, Chief General Manager, PFRDA.

The change follows Department of Expenditure Office Memorandum F.No. 1(3)/EV/2020 dated 1 July 2026. It follows an earlier expansion for Central Government subscribers: Department of Financial Services Gazette Notification No. FX-4/2/2025-PR dated 13 November 2025, which PFRDA implemented through Circular PFRDA/2025/21/Reg-PF/03 dated 1 December 2025. CAB staff now get a comparable expansion, about seven months after the December 2025 circular.

This explainer sets out what each of the six options does, how NPS money is taxed when it comes out, and a worked drawdown on a hypothetical corpus. It does not recommend any option or Pension Fund. If you want to model your own numbers alongside it, the NPS calculator and the retirement drawdown calculator are the two tools used in this piece.

The Scheme Explained

The NPS is a defined-contribution pension scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Unlike the old defined-benefit pension, the final corpus depends on contributions and on the returns earned by the investment option chosen. That is why the 9 July 2026 circular matters: it raises the highest starting equity share among the life-cycle options from 50% under LC50 to 75% under LC75.

PFRDA cites its powers under Section 14(2)(b) read with Section 23 of the PFRDA Act, 2013, and Regulation 14(1) of the PFRDA (Pension Fund) Regulations, 2015. The full text of the Act is available on India Code, and the circular itself is published on the PFRDA website.

The six options at a glance

Before the circular, CAB subscribers had four options. The circular keeps all four and adds two, for a total of six:

Source: PFRDA Circular PFRDA/2026/39/SUP-CGSG/01 dated 9 July 2026.

How the life-cycle funds behave

All four Auto Choice funds follow the same logic: a higher equity share in the early years, tapering down as the subscriber approaches 55, and then held steady until exit. The differences lie in two numbers: the starting equity share and the age at which the taper begins.

• LC25 starts at 25% equity, begins tapering after 35 and reaches 5% at 55, which it holds till exit.
• LC50 starts at 50% equity, begins tapering after 35 and reaches 10% at 55.
• LC75 starts at 75% equity, begins tapering after 35 and reaches 15% at 55, continuing at that level till exit.
• Life Cycle Aggressive starts at 50% equity, but holds it 10 years longer, until 45, and then tapers to 35% at 55, continuing at that level till exit.

The two new options therefore change different things. LC75 raises the starting equity share by 25 percentage points over LC50 but follows the same age-35 taper. Life Cycle Aggressive does not raise the starting share above 50%, but it keeps equity at 50% for an extra decade and ends at 35% equity, which is 20 percentage points more than LC75's 15% end-point and 30 percentage points more than LC25's 5%.

The circular does not publish the year-by-year taper schedule within each band, so subscribers should read the scheme details on the NPS Trust website before switching.

Picking a Pension Fund

Paragraph 5 of the circular adds a procedural condition. A subscriber who moves away from the Default Scheme must choose one of the five non-default options and must also select one Pension Fund registered with PFRDA. The Default Scheme is the only option where the allocation is spread across three Pension Funds without the subscriber making that selection.

Paragraph 6 points subscribers to the NPS Trust website, where scheme-wise and Pension Fund-wise performance is published. Past returns published by NPS Trust relate to past periods and do not guarantee future returns.

Tax on Withdrawal

The investment option you pick changes how large the corpus grows; it does not change how the corpus is taxed on the way out. Three sets of rules apply.

Exit split by sector

The PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025, notified on 19 December 2025, set different exit splits for the government and non-government sectors. Which row applies depends on the sector in which your PRAN is registered, which your nodal office can confirm.

Source: PFRDA press release dated 19 December 2025; Section 10(12A), Income-tax Act, 1961.

Lump sum: Section 10(12A)

Section 10(12A) of the Income-tax Act exempts the payment received on closure of the NPS account or on opting out, to the extent it does not exceed 60% of the total amount payable. That 60% figure has applied since 1 April 2020. The text is available on the Income Tax Department portal.

For a government-sector subscriber, the maximum lump sum and the exemption ceiling are both 60%, so the two limits line up. For a non-government subscriber, they no longer line up: PFRDA allows 80% to be withdrawn, but Section 10(12A) still exempts only 60%. No Finance Act amendment aligning the two has been located as of 27 October 2026, so a non-government subscriber withdrawing more than 60% should confirm the tax treatment of the excess with a tax adviser before filing.

Annuity income: taxed at slab rates

The minimum 40% (government sector) or 20% (non-government sector) that must buy an annuity produces a regular income. That annuity income is added to total income and taxed at the subscriber's slab rate in the year it is received. Under the new regime for FY 2025-26, the slabs start at 0% up to Rs 4 lakh, 5% from Rs 4 lakh to Rs 8 lakh, and 10% from Rs 8 lakh to Rs 12 lakh. The Section 87A rebate in the new regime is up to Rs 60,000 for total income up to Rs 12 lakh, so a retiree whose slab-rate income stays within that threshold pays no tax on it under the new regime. Under the old regime, the rebate is up to Rs 12,500 for income up to Rs 5 lakh.

You can compare an annuity against a systematic withdrawal plan side by side with the annuity vs SWP calculator.

Partial withdrawals: Section 10(12B)

Before exit, a subscriber with at least 3 years in the scheme may withdraw up to 25% of their own contributions, excluding the employer's share and returns. Up to 4 withdrawals are allowed before age 60, at least 4 years apart; after 60, withdrawals must be at least 3 years apart. Section 10(12B) exempts these withdrawals to the same 25% limit, so the PFRDA cap and the tax exemption still match for partial withdrawals.

Worked Drawdown

The following example is hypothetical. It uses round numbers to show the mechanics of the exit rules; it is not a projection of any NPS option's returns, which are not guaranteed.

Step 1: The exit split

Take a government-sector subscriber who exits at superannuation with a corpus of Rs 50 lakh.

• Maximum lump sum at 60%: Rs 30 lakh.
• Minimum annuity purchase at 40%: Rs 20 lakh.
• Tax-exempt portion of the lump sum under Section 10(12A): 60% of Rs 50 lakh, which is Rs 30 lakh. The entire lump sum falls within the exemption.

Because the corpus is above Rs 12 lakh, neither the full-withdrawal band (up to Rs 8 lakh) nor the mid band (Rs 8 lakh to Rs 12 lakh) applies.

Step 2: Drawing down the Rs 30 lakh lump sum

Suppose the retiree parks the Rs 30 lakh in an income portfolio and withdraws Rs 3 lakh at the start of each year. The table tests two assumed annual returns, 5% and 7%. These rates are illustrative assumptions chosen for the arithmetic only; they are not forecasts and not the return of any NPS scheme.

Method: each year, Rs 3 lakh is withdrawn first and the remaining balance grows at the assumed rate. For year 1 at 7%: (Rs 30,00,000 minus Rs 3,00,000) multiplied by 1.07 gives Rs 28,89,000.

Two points stand out. First, a 2 percentage point difference in the assumed return changes the end of year 10 balance by Rs 5,41,726 (Rs 14,66,374 less Rs 9,24,648). Second, at a Rs 3 lakh withdrawal, which is 10% of the starting pot, the money runs out in the 14th year at 5% and in the 16th year at 7%. A retiree expecting to live 25 years beyond 60 would need either a smaller withdrawal, a higher return, or other income.

Step 3: Where the annuity fits

The Rs 20 lakh annuity purchase provides a separate income stream for life (depending on the annuity variant chosen). Annuity rates vary by insurer, age and variant, so they are not assumed here. What can be stated is the tax position: annuity income is taxed at slab rate, and if that income plus any other slab-rate income stays within Rs 12 lakh in a year, the new-regime Section 87A rebate of up to Rs 60,000 brings the tax on it to nil for FY 2025-26.

Step 4: How the investment option feeds the drawdown

The option chosen during the working years determines the size of the starting corpus and how much of it sits in equity close to exit. Using the circular's end-points, a subscriber on LC25 holds 5% equity from 55, one on LC75 holds 15%, and one on Life Cycle Aggressive holds 35%. On a Rs 50 lakh corpus at 55, that is Rs 2.5 lakh, Rs 7.5 lakh and Rs 17.5 lakh in equity respectively. A larger equity share near exit means the exit value is more exposed to market swings in the final years; a smaller share means less exposure but also less participation in any equity gains. Which trade-off suits a given employee is a personal decision, and nothing here is a recommendation.

Small corpus variants

Source: PFRDA press release dated 19 December 2025. Where the lump sum taken exceeds 60% of the total amount payable, as in the Rs 7 lakh row, confirm the tax treatment of the portion above 60% because Section 10(12A) exempts only 60%.

FAQ

Who is covered by the 9 July 2026 PFRDA circular?

The circular applies to NPS subscribers employed by Central Autonomous Bodies (CABs). Central Government subscribers received a similar expansion earlier through PFRDA Circular PFRDA/2025/21/Reg-PF/03 dated 1 December 2025.

How many investment options do CAB employees now have?

Six: the Default Scheme, Active Choice 100% G-Sec, Auto Choice LC25, Auto Choice LC50, and the two new options, Auto Choice LC75 and Auto Choice Life Cycle Aggressive.

What is the difference between LC75 and Life Cycle Aggressive?

LC75 starts at 75% equity till age 35 and tapers to 15% at 55. Life Cycle Aggressive starts at 50% equity but holds it till age 45, then tapers to 35% at 55. Both continue at their age-55 level till exit.

Do I have to choose a Pension Fund if I leave the Default Scheme?

Yes. Under paragraph 5 of the circular, a subscriber choosing any of the five non-default options must also select one Pension Fund registered with PFRDA.

Does choosing LC75 or Life Cycle Aggressive change my tax at exit?

No. The investment option affects the size of the corpus, not its tax treatment. The lump sum is exempt under Section 10(12A) up to 60% of the total amount payable, and annuity income is taxed at slab rates.

Where can I compare Pension Fund performance?

Paragraph 6 of the circular directs subscribers to the NPS Trust website, npstrust.org.in, which publishes scheme-wise and Pension Fund-wise returns. Past returns do not guarantee future performance.

Can a government-sector subscriber take 80% as a lump sum?

No. The 80% lump sum limit introduced on 19 December 2025 applies to the non-government sector. The government sector remains at a maximum 60% lump sum and a minimum 40% annuity.

This article explains a PFRDA circular and the related tax rules as of 27 October 2026. It is general information, not investment or tax advice, and does not recommend any NPS option or Pension Fund.