Permanent Retirement Account Number
Also written PRAN · Permanent Retirement Account Number (PRAN)
The unique account number issued when an NPS account is opened; it stays with the subscriber for life and across employers, which is what makes NPS portable in a way EPF historically was not.
In plain language
A PRAN is issued the moment an NPS account is opened, and it stays with the subscriber for the whole of their lifetime. The Tier II account, if opened, hangs off the same PRAN.
That sounds administrative. It is not. It is the mechanism behind the single most valuable feature of NPS for anyone who changes jobs: one person, one retirement account, from the first job to the last.
How it works
Compare the two mandatory retirement products on what happens when somebody resigns.
EPF: the new employer may open a new PF account. Do that three or four times over a career and there are three or four balances, some dormant, each with its own service-period clock. The workbook notes that this is exactly why the Universal Account Number was introduced — to let the balances be transferred online and the service periods be stitched together.
NPS: there is nothing to transfer, because one cannot hold multiple NPS accounts. Once a PRAN exists, the same PRAN is used with the next employer if that employer is a registered entity. If it is not — a move abroad, self-employment, a start-up that has not signed up — the subscriber simply continues the same PRAN under the All Citizen Model and keeps contributing personally.
One recent qualification: under the Multiple Scheme Framework for non-government sector subscribers, a subscriber identified by PAN may hold multiple schemes, and PFRDA has notified that they may open multiple PRANs with different Central Recordkeeping Agencies. The lifetime-single-account principle still governs the ordinary salaried subscriber.
A worked example
Mr Deshpande, aged 30, changes employer after 3 years and 7 months, with Rs 4,80,000 in his EPF account, and takes the money out rather than transferring it. He is in the 30% slab.
The EPF withdrawal, before five years of continuous service:
Taxable in the year of receipt Rs 4,80,000
Tax at 30% Rs 1,44,000 (plus cess)
Had he transferred the balance to the new employer instead, it would have stayed tax-free and the old service period would have counted towards the five years.
What the cash was actually worth. Left to compound to age 60 — another 22 years — at 8%:
4,80,000 x 1.08^22 = Rs 26.1 lakh
So the withdrawal cost him Rs 1.44 lakh of immediate tax and roughly Rs 26 lakh of retirement corpus.
Had the Rs 4,80,000 been in NPS instead, the question would never have arisen: the corpus sits under one PRAN, the new employer is simply mapped to it, and nothing is paid out or taxed. That is the entire practical content of the term.
Why NISM asks about it
PRAN appears in Chapter 5, section 5.1.6 as a feature of NPS, and again in Chapter 6 (Miscellaneous Aspects of Retirement Planning) in the section on the benefits of transferring a retirement corpus when changing jobs — which is where it is actually examined. Expect comparison questions: which retirement product is easier to carry across employers, and what happens to EPF, to NPS and to the tax position when a subscriber resigns before five years of service. Chapter 12 uses it again when dealing with Tier I versus Tier II taxation.
Common exam traps
- PRAN is not UAN. PRAN is the NPS account number issued by the CRA; UAN is the EPF identifier that links a member's several PF accounts. They belong to different schemes and different regulators.
- A PRAN does not lapse when an employer relationship ends. It converts to the All Citizen Model and keeps running — the common wrong answer is that the account has to be closed or transferred.
- Tier II is not a separate account number. It is associated with the same PRAN, which is why closing Tier I is not a neutral act for Tier II.
- Having one PRAN does not mean having one scheme. Under the Multiple Scheme Framework a non-government subscriber may hold several schemes, and even multiple PRANs across different CRAs.
- Portability solves the administration, not the funding. A subscriber who stops contributing during a career break still ends up with a smaller corpus, PRAN intact.
Check yourself
1.Why does the workbook say shifting an NPS corpus on a job change is easier than shifting EPF?
- a)Because NPS withdrawals are always tax-free
- b)Because one cannot have multiple NPS accounts, so the same PRAN continues with the new employer or under the All Citizen Model
- c)Because PFRDA transfers the corpus automatically without the subscriber acting
- d)Because NPS has no minimum service requirement for a transfer
Show the answer
Answer: (b) Because one cannot have multiple NPS accounts, so the same PRAN continues with the new employer or under the All Citizen Model
The workbook's reason is structural: one cannot have multiple NPS accounts, so once a PRAN is generated it simply moves with the subscriber. If the new employer is a registered entity the same PRAN is used; if not, the employee can still continue the PRAN under the All Citizen Model. EPF, by contrast, can multiply into several accounts, causing operational issues, a cascading tax effect on older balances and lost compounding.
2.What distinguishes an NPS Tier II account from a Tier I account?
- a)Tier II is the mandatory retirement account and Tier I is voluntary
- b)Tier II is a voluntary savings account from which the subscriber can withdraw at any point of time
- c)Tier II can be opened without a PRAN
- d)Tier II enjoys the same exemptions as Tier I on withdrawal
Show the answer
Answer: (b) Tier II is a voluntary savings account from which the subscriber can withdraw at any point of time
Tier I is a MANDATORY retirement account, whereas Tier II is a VOLUNTARY SAVING ACCOUNT associated with the PRAN of the subscriber. Tier II offers greater flexibility in terms of withdrawal — unlike Tier I, the subscriber CAN WITHDRAW AT ANY POINT OF TIME. Tier II gets none of the NPS exemptions: any profit or loss on withdrawal from a Tier II account is taxable under the head CAPITAL GAINS, like an open-ended mutual fund.
Where this is taught
- Series X-B · Chapter 6: Miscellaneous aspects of Retirement Planningintroduced here
- Series SEBI-ICE · Chapter 7: Pension, Retirement and Estate Planningintroduced here
- Series X-A · Chapter 17: Operational Aspects of Investment Managementintroduced here
- Series X-B · Chapter 12: Taxation of Other Products
Related terms
- National Pension SystemA PFRDA-regulated, defined-contribution retirement scheme in which the subscriber builds a market-linked corpus and must convert part of it into an annuity at exit; there is no guaranteed return.
- Universal Account NumberA 12-digit number allotted to every employee contributing to the EPF, unchanged for life across every employer — the key that makes an online PF transfer possible instead of a taxable withdrawal.
- Employee Provident FundA mandatory retirement savings scheme where employer and employee each contribute 12% of basic pay, credited to the employee's own account and paid out as a lump sum at retirement.
- Tier II accountThe voluntary NPS investment account open only to holders of an active Tier I account, with no withdrawal restrictions, no mandatory annuity and, except for NPS-TTS, no tax benefit.
- NPS VatsalyaA saving-cum-pension scheme introduced in Budget 2024 under which a parent opens and operates an NPS Tier 1 account in a minor child's name until the child turns 18.
- Auto ChoiceThe NPS investment option in which your contributions go into a lifecycle fund that automatically cuts equity and raises corporate bonds and government securities as you grow older.
- Lifecycle fundThe NPS Auto Choice investment option that shifts a subscriber's money away from equity and toward safer bonds and government securities automatically, as they age.
- PensionA regular payment a person receives after retiring from regular work, or on reaching a certain age, so they have an income once they stop earning.
- Double add-backWhen an employer's NPS contribution above Rs 7.5 lakh is added to salary twice over — once as ordinary salary income, once as a perquisite — while only one deduction is ever allowed against it.
- Central Recordkeeping AgencyThe intermediary that holds every NPS subscriber record — it issues the PRAN, unitises contributions at scheme NAV and sits between the subscriber, the pension funds and the trustee bank.
- Unified Pension SchemeAn option under the NPS for Central Government employees, effective 1 April 2025, that adds an assured payout of 50 percent of the last 12 months' average basic pay after 25 years of qualifying service.
- Atal Pension YojanaA government-guaranteed defined-pension scheme for unorganised-sector workers, paying a fixed Rs 1,000 to Rs 5,000 a month from age 60 for contributions started between ages 18 and 40.
- Tier I accountThe mandatory NPS retirement account: restricted withdrawals, a 75% equity cap, tax benefits and compulsory annuity purchase with part of the corpus on exit.
- Retirement AdviserA PFRDA-registered individual or firm that advises subscribers on the NPS for a fee, acting in a fiduciary capacity and never collecting cash for contributions.