Permanent Retirement Account Number

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.

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.

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.

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.

• 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.