NPS Sanchay explained: PFRDA's May 2026 simplified NPS variant for informal-sector workers aged 18 to 85

On 06 May 2026, the Pension Fund Regulatory and Development Authority (PFRDA) issued Circular PFRDA/2026/25/NPS-AGRI/01, titled "Introduction of NPS Sanchay (simplified NPS Variant) under All Citizen Model and MSF Framework for Informal Sector". The circular, signed by Ashish Kumar, Chief General Manager, took effect immediately. It creates a default, low-decision version of the National Pension System aimed at the informal sector, which PFRDA says employs close to 90% of India's workforce while sitting largely outside formal pension coverage.

This guide sets out what NPS Sanchay is, who can join between the ages of 18 and 85, how its investment pattern differs from the regular All Citizen tiers, how withdrawals are taxed, and how a worked drawdown of a hypothetical Rs 30 lakh corpus might look across 16 years. Rules come from the circular, the PFRDA exit amendment notified on 19 Dec 2025, and the Income-tax Act; where the circular is silent, we say so.

The Scheme Explained

What PFRDA actually created on 06 May 2026

NPS Sanchay is not a new scheme with its own rulebook. The circular describes a "simplified NPS Variant" under two existing structures: the All Citizen Model and the Multiple Scheme Framework (MSF). PFRDA's stated rationale is that choosing investment options is complex and last-mile advisory support is limited, so the variant offers one default design.

The legal basis cited is Section 14(1) read with Section 14(2)(e) of the PFRDA Act, 2013, the provisions that empower the regulator to protect subscriber interests and regulate the schemes it supervises. The full Act text is available on India Code.

Eligibility and enrolment

The circular sets three conditions:

1. Citizenship: any citizen of India.
2. Age: between 18 and 85 years on the date of application. That upper limit matches the 85-year maximum entry age adopted for NPS by the 19 Dec 2025 amendment.
3. KYC: completed as per the Subscriber Registration Form; KYC is mandatory, with no relaxed or exempt category mentioned.

Enrolment runs through a Point of Presence (PoP), a PoP-Service Provider, or an online platform. PoP charges, the minimum contribution, and the minimum subsequent contribution are all the same as for the Common Schemes, which the circular names as NPS All Citizen, NPS Vatsalya and NPS Lite. The circular does not restate those rupee amounts, so confirm the current figures with your PoP before the first deposit.

The investment pattern: government-sector rules for a private citizen

Under paragraph 4 of the circular, the money is invested in line with the Government Sector investment guidelines, the same pattern used for the UPS/NPS/APY Central and State Government default schemes, Corporate CG, NPS Lite and APY. Those guidelines are laid down in PFRDA Master Circular PFRDA/Master Circular/2025/05/PF-03 dated 10.12.2025.

In practice, a Sanchay subscriber gets the regulator-prescribed allocation that government employees receive by default, with no Active or Auto Choice decision. All registered Pension Funds must offer the variant, and under All Citizen Model rules the subscriber may later change fund and allocation.

Pension Funds may also launch MSF versions with identical terms except the investment pattern, which paragraph 4 governs.

How NPS Sanchay compares with the other retail NPS routes

The circular applies the PFRDA (Exits and Withdrawals under NPS) Regulations, 2015, as amended, mutatis mutandis, without saying which sector table governs. Sitting under the All Citizen Model points to the non-government thresholds, but the investment pattern borrows from the government sector, where the lump-sum ceiling is still 60%. Until PFRDA or your Central Recordkeeping Agency confirms in writing, model both; the worked example below does.

Current exit and withdrawal rules (19 Dec 2025 amendment)

Source: PFRDA's table of key amendments, press release dated 19 Dec 2025. The amendment also removed the 5-year lock-in for non-government premature exit.

Partial withdrawals

Under the same 2025 amendment, after 3 years in the scheme a subscriber may withdraw up to 25% of their own contributions (excluding employer share and returns): up to 4 times before age 60 with a 4-year gap, and without a count limit after 60 subject to a 3-year interval.

Tax on Withdrawal

Contributions: old regime only for the extra deduction

Under the old regime, contributions are deductible under Section 80CCD(1) within the Section 80C ceiling. The additional Rs 50,000 deduction under Section 80CCD(1B) is available only under the old tax regime and is not available under the new tax regime. For FY 2025-26 the new regime is the default, where the Section 87A rebate is Rs 60,000 for total income up to Rs 12 lakh.

Lump sum at exit: two ceilings, not one

Since 19 Dec 2025, PFRDA allows a non-government subscriber to take up to 80% of the corpus as a lump sum. PFRDA, however, has no power over the Income-tax Act. Section 10(12A) still exempts the payment on closure or opting out only "to the extent it does not exceed sixty per cent of the total amount payable", a limit in force since 1 Apr 2020. The statute is published on the Income Tax Department portal.

So a subscriber may withdraw up to 80% under the PFRDA rule, while Section 10(12A) exempts only the first 60% of the total amount payable. We have found no Finance Act amendment that aligns the two. We are not asserting that the 60% to 80% slice is taxable, nor that it is exempt: confirm its treatment with a chartered accountant or the Income Tax Department before you withdraw it.

Partial withdrawals and annuity income

Partial withdrawals are exempt under Section 10(12B), which covers withdrawals up to 25% of the subscriber's own contributions, the same figure as the PFRDA limit. The annuity bought with the remaining corpus pays a pension that is added to total income and taxed at slab rates in the year it is received.

New regime slabs that apply to the pension

For FY 2025-26, the new regime slabs are nil up to Rs 4 lakh, 5% from Rs 4 lakh to Rs 8 lakh, 10% from Rs 8 lakh to Rs 12 lakh, 15% from Rs 12 lakh to Rs 16 lakh, 20% from Rs 16 lakh to Rs 20 lakh, 25% from Rs 20 lakh to Rs 24 lakh and 30% above Rs 24 lakh, plus 4% health and education cess. For a retiree whose annuity plus interest income stays below Rs 12 lakh, the new regime rebate of Rs 60,000 typically reduces the tax to nil.

Worked Drawdown

The setup

Take a hypothetical subscriber, Meena, a self-employed tailor who joins NPS Sanchay at 35 and builds a corpus of Rs 30 lakh by the time she exits at 60. Her projected corpus is an assumption for illustration, not a forecast; use the NPS calculator to model your own contributions.

Under the non-government reading of the exit rules, Meena's Rs 30 lakh corpus is above the Rs 12 lakh middle-band ceiling, so the 80/20 rule applies:

• Up to Rs 24 lakh (80%) as a lump sum.
• At least Rs 6 lakh (20%) used to buy an annuity from an empanelled Annuity Service Provider.

If PFRDA instead applies the government-sector table to Sanchay, she could take at most Rs 18 lakh (60%) and would need to annuitise at least Rs 12 lakh (40%). Under that reading the whole lump sum would also sit within the Section 10(12A) 60% exemption.

Option A: self-managed drawdown of the Rs 24 lakh lump sum

Meena withdraws Rs 2.4 lakh at the start of each year, 10% of the opening lump sum, and keeps the balance in an instrument earning 7.1% a year. We use 7.1% because it is the current PPF rate for Q3 FY 2026-27 (October to December 2026), not because a retiree can necessarily lock that rate for 16 years. Small-savings rates are reset every quarter, and the next review is due on 01 Jan 2027.

At a flat Rs 2.4 lakh a year with no increase for inflation, the lump sum lasts into year 16, roughly age 75 to 76. Because the 2025 amendment extended the maximum exit age to 85, Meena could also defer her exit and let the corpus keep compounding inside NPS rather than draw it down early. Test different withdrawal rates on the retirement drawdown calculator.

Option B: park part of the lump sum in SCSS

Once she is 60, Meena becomes eligible for the Senior Citizens' Savings Scheme, which pays 8.2% a year for Q3 FY 2026-27, credited quarterly. On a hypothetical Rs 24 lakh deposit, that works out to Rs 49,200 a quarter, or Rs 1,96,800 a year, while the principal stays intact. Check the deposit ceiling at India Post first. The SCSS calculator shows the quarterly payout for any deposit.

The annuity leg

The Rs 6 lakh annuity purchase produces a lifetime pension whose size depends on the rate the Annuity Service Provider quotes on the day of purchase; we do not quote a rate here because none is set by regulation. Compare that guaranteed stream against a systematic withdrawal plan on the annuity vs SWP calculator, and read our explainer on NPS Retirement Income Schemes and the Systematic Payout Rate for the regulated drawdown route that runs up to age 85.

Tax on Meena's year-1 income

In year 1 of Option A, the Rs 2.4 lakh drawdown is her own lump sum, not fresh income; only interest on the balance is taxable. That interest, Rs 1,53,360 in year 1 (7.1% on the Rs 21.6 lakh left after the withdrawal), plus her annuity pension, would need to exceed Rs 12 lakh before the new regime 87A rebate of Rs 60,000 stops covering it. For most informal-sector retirees on these numbers, the year-1 tax bill under the new regime would be nil. The open question remains the Rs 6 lakh slice between 60% and 80%, discussed above.

For deeper context on adjacent PFRDA changes, see our pieces on surrendering an NPS annuity for critical illness and on NPS Swasthya. A later PFRDA circular extended the grass-root pension agent incentive framework to Sanchay enrolments. The primary document for this article is the PFRDA circular of 06 May 2026.

FAQ

Who can open an NPS Sanchay account?

Any citizen of India aged 18 to 85 on the date of application can enrol through a Point of Presence, a PoP-Service Provider or an online platform, after completing mandatory KYC as per the Subscriber Registration Form. This is set out in PFRDA Circular PFRDA/2026/25/NPS-AGRI/01 dated 06 May 2026.

How is NPS Sanchay money invested?

It follows the Government Sector investment guidelines in PFRDA Master Circular PF-03 dated 10.12.2025, the same pattern used for central and state government default schemes, NPS Lite and APY.

Is NPS Sanchay the same as NPS Lite?

No. Both use the Government Sector investment pattern, but NPS Sanchay sits under the All Citizen Model and the Multiple Scheme Framework, and its PoP charges and contribution minimums are aligned with the Common Schemes. NPS Lite has its own exit rules, including a 60% lump-sum ceiling and a Rs 2 lakh full-withdrawal threshold.

How much can I withdraw as a lump sum when I exit at 60?

The circular applies the Exit and Withdrawal Regulations 2015, as amended, mutatis mutandis. Under the non-government table, you may take up to 80% as a lump sum, or the full corpus if it is Rs 8 lakh or less. Section 10(12A) exempts only up to 60% of the total amount payable, so confirm the tax position of anything above that.

Can I take money out before 60?

Yes. After 3 years in the scheme you may make partial withdrawals of up to 25% of your own contributions, up to 4 times before age 60 with a 4-year gap. These are exempt under Section 10(12B). A non-government premature exit allows up to 20% as a lump sum unless the corpus is Rs 5 lakh or less.

Can I claim the extra Rs 50,000 deduction for NPS Sanchay contributions?

Only under the old tax regime. Section 80CCD(1B) is not available under the new tax regime, which is the default for FY 2025-26. Under the new regime, income up to Rs 12 lakh qualifies for the Rs 60,000 Section 87A rebate, so many informal-sector subscribers will pay no tax either way.