National Pension Scheme

National Pension Scheme: Family Pension for Missing Employees

If an NPS subscriber goes missing, the family does not have to wait seven years for a civil court to presume death. Under the PFRDA framework, an FIR filed with the local police is the trigger. Six months after the FIR date — once the police confirm the employee is still untraced — the family can receive both a monthly family pension and the full NPS Tier I corpus payout. An indemnity bond secures the government's recovery rights if the subscriber resurfaces. For FY 2026-27 this procedure remains fully operative.

The Seven-Year Problem This Provision Was Built to Fix

For decades, families of missing government employees faced one of the most punishing administrative gaps in Indian public finance. A flood-relief worker swept away mid-operation, a border-posting soldier listed as absent without trace, a mid-level official who vanished during field duty — in every case, the accumulated National Pension System (NPS) corpus and the monthly family pension sat frozen.

The barrier was Section 108 of the Indian Evidence Act, 1872, which creates a legal presumption of death only after a person has not been heard of for seven continuous years. Without that presumption, no civil court would issue a death certificate equivalent. Without a death certificate, neither the Central Pension Accounting Office (CPAO) for central government employees, nor the state treasury for state government employees, nor the Central Recordkeeping Agency (CRA) for corporate-sector subscribers would release a single rupee.

Seven years of zero income, mounting household debt, children's education stalling, and a spouse left managing all of it with no institutional support — that was the lived reality the new provision addresses. By anchoring the claim to a police FIR plus six months, and replacing the death certificate with an indemnity bond, PFRDA and the Department of Pension & Pensioners' Welfare (DoPPW) compressed a seven-year wait into roughly eight months of total elapsed time.

Who the Provision Covers

Before filing a single document, confirm which category applies to the missing subscriber. The claim route, the form numbers, and the sanctioning authority differ across categories.

Central Government employees (post-2004 joiners) Mandatorily enrolled in NPS Tier I from 1 January 2004 onwards. Claim flows: DDO → Pay and Accounts Office (PAO) → CPAO → CRA. The defined-benefit family pension component is governed by the CCS (Pension) Rules, 2021 (which replaced the 1972 Rules).

State Government employees Most states adopted NPS for employees joining after 2004, though the exact cut-off date varies by state. Claim flows through the state Finance Department or state treasury. The applicable service rules vary state-to-state; HR teams must confirm whether the state has issued its own circular aligning with the PFRDA missing-employee provision.

Corporate sector NPS subscribers Private-sector employees enrolled through the Corporate NPS model. The employer's HR or accounts team functions as the Nodal Office on the CRA portal. The claim flows through the Nodal Office to the CRA, with no separate pension sanctioning authority for the defined-benefit component (since corporate NPS does not carry a government-side family pension guarantee — the benefit here is purely the accumulated corpus).

All-Citizens model (individual) subscribers Individuals who enrolled directly through a Point of Presence (PoP) — a bank, post office, or registered PoP-Service Provider. Claims route through the PoP to the CRA.

> HR note: If your company runs a Corporate NPS scheme, you are the Nodal Office. The legal basis for missing-subscriber claims is the PFRDA (Exits and Withdrawals under NPS) Regulations, 2015, read with subsequent PFRDA circulars. Keep a printed copy of the applicable circular in your compliance kit.

Documents You Must Gather Before Approaching Any Authority

Incomplete submissions are the single biggest source of delay. Assemble every document listed below before the first formal submission — pension authorities and CRAs routinely return files if even one item is missing.

From the police:

• FIR copy bearing the FIR number, date, police station name, and official stamp
• "Not-traced" or "undetected" status report from the Superintendent of Police (SP) or Deputy Commissioner of Police (DCP), dated at least six months after the FIR date — this is the document that triggers eligibility

From the employer:

• Head of Office certificate confirming the employee's non-attendance from the specified date and the missing status
• PRAN (Permanent Retirement Account Number) and Tier I corpus statement — download from the CRA portal: enps.nsdl.com (Protean eGov) or KFin eNPS portal, depending on the CRA assigned to the PRAN
• Service book extracts: designation, pay history, date of entry into NPS, nominee details on record

Legal and indemnity documents:

• Indemnity bond executed on non-judicial stamp paper (denomination as prescribed by the state where it is executed) by the claimant, agreeing to refund all benefits if the employee resurfaces
• Undertaking confirming the employee has not been in contact and that the claimant will inform the pension authority immediately if he or she reappears

Relationship and identity proofs of the claimant:

• Marriage certificate (spouse claimants)
• Birth certificates of dependent children
• Legal heirship certificate or succession certificate from a competent civil court if the subscriber registered no nomination on the CRA
• Aadhaar card and PAN card of the claimant
• Cancelled cheque or bank passbook copy (account number and IFSC) for direct credit

NPS-specific:

• Nomination form as registered on the CRA — corpus is released only to the registered nominee; absence of a nomination triggers the succession-certificate route, adding months to the process
• Tier II account statement, if the subscriber held one — Tier II balances are often overlooked and can be claimed simultaneously

The Claim Process: A Step-by-Step Sequence

Follow this order precisely. Out-of-sequence filing creates gaps in the paper trail that pension authorities flag during processing.

Step 1 — File the FIR The spouse or nearest family member files an FIR at the police station with jurisdiction over the employee's last known location — not the family's home address. Include a recent photograph, the employee's PRAN number, designation, last posting, and all known circumstances. Collect the station-acknowledged copy. The FIR date is Day Zero for all subsequent timelines.

Step 2 — Notify the employer in writing, within 30 days Submit a written intimation to the Head of Department or DDO within 30 days of the FIR. Attach the FIR copy. Request that the employer record the missing status in service files and preserve the service book. A failure to notify promptly creates a discrepancy between the service record and the FIR date that pension authorities will query.

Step 3 — Obtain the "not-traced" police status report at the six-month mark Police stations do not automatically generate or dispatch this document. Six months after the FIR, the family must write to the SP or DCP requesting a status certificate in writing. Keep the acknowledgment of that request. If the station is unresponsive, escalate to the District Superintendent of Police. This report is the single most critical document in the chain — without it, no authority will process the pension claim.

Step 4 — Compile and submit the claim package to the employer With the status report in hand, assemble the full document bundle and submit to the DDO (government employees) or Nodal Office (corporate employees). The employer then prepares two parallel streams:

• Forwarding letter to the pension sanctioning authority (CPAO for central government; state treasury for state government)
• NPS withdrawal initiation on the CRA portal via the Nodal Office's login

Step 5 — Execute the indemnity bond The claimant signs the indemnity bond before a notary or, where prescribed, before the Sub-Registrar of Assurances. The employer retains the original; certified copies go to the pension sanctioning authority and the CRA.

Step 6 — Pension authority approves and issues PPO CPAO or the state treasury processes the family pension sanction and issues a Pension Payment Order (PPO). Central government cases typically take 30–60 days from receipt of the complete file. The monthly family pension then begins, usually backdated to the date of eligibility.

Step 7 — CRA releases the NPS corpus The CRA (Protean or KFin) verifies the PRAN, confirms nominee details, validates the indemnity bond, and processes the withdrawal. This typically takes 15–20 working days after the Nodal Office initiates the withdrawal request on the CRA portal.

Step 8 — Periodic status reviews Every six months, obtain a fresh "still untraced" confirmation from the police and submit it to the pension authority. Benefits continue as long as the employee remains untraced. If the employee resurfaces, the indemnity bond activates and benefits already received must be refunded.

Worked Example: What the Family Actually Receives

Let us put real numbers to a central government NPS subscriber so you can see exactly what flows, when, and how it is taxed.

The scenario Priya's husband Anil is a central government employee (NPS subscriber since 2009). He goes missing in a flood-relief operation in September 2025. Last-drawn basic pay: Rs. 78,000/month. Accumulated NPS Tier I corpus at the time of disappearance: Rs. 52,00,000 (Rs. 52 lakhs). Priya files an FIR on 15 September 2025. She obtains the SP's "not-traced" report on 20 March 2026 and submits a complete claim package. Pension is sanctioned effective 1 April 2026.

Component 1: Enhanced Family Pension (first 10 years)

Under the CCS (Pension) Rules, 2021 — which govern the defined-benefit family pension component for central government NPS employees — enhanced family pension equals 50% of last drawn basic pay.

• Enhanced family pension (basic): 50% × Rs. 78,000 = Rs. 39,000/month
• Dearness Allowance (DA) for pensioners, at the rate applicable as notified by the government (currently ~55% of basic pension): Rs. 39,000 × 55% = Rs. 21,450/month
• Total approximate in-hand enhanced pension: Rs. 60,450/month

This enhanced rate continues for 10 years (until March 2036), until Priya remarries, or until Anil's age would have reached 67 — whichever comes first. After that, normal family pension kicks in at 30% of basic pay (Rs. 23,400/month + applicable DA).

Component 2: NPS Tier I Corpus Payout

On death or missing-equivalent, 100% of the Tier I corpus may be paid to the nominee as a lump sum. This is a critical distinction from superannuation exit, where 40% must mandatorily be used to purchase an annuity. On death, the nominee has complete flexibility.

• If Priya opts for 100% lump sum: Rs. 52,00,000 credited directly to her bank account
• If she opts to use Rs. 15,00,000 for an annuity and take the balance in cash: Rs. 37,00,000 cash + annuity income from Rs. 15 lakhs (annuity rate as notified by the chosen annuity service provider)

Component 3: Death-cum-Retirement Gratuity (DCRG)

Formula under CCS (Pension) Rules, 2021: (qualifying service in years ÷ 2) × last emoluments, subject to a ceiling of Rs. 20 lakh (as currently notified).

• Anil's qualifying service: 16 years
• DCRG = (16 ÷ 2) × Rs. 78,000 = 8 × Rs. 78,000 = Rs. 6,24,000
• DCRG is fully exempt from income tax in Priya's hands.

Component 4: Leave Encashment

Anil had 220 days of earned leave to his credit.

• Leave encashment = 220 × (Rs. 78,000 ÷ 30) = 220 × Rs. 2,600 = Rs. 5,72,000
• Exempt from tax in the hands of the recipient on death of a government employee.

Total approximate first-year inflows: Rs. 52,00,000 (corpus) + Rs. 6,24,000 (DCRG) + Rs. 5,72,000 (leave encashment) + Rs. 7,25,400 (annual enhanced pension) = roughly Rs. 71 lakhs in year one, plus ongoing monthly pension thereafter.

Tax Treatment: What Gets Taxed and What Does Not (AY 2027-28)

Monthly Family Pension

Monthly family pension is taxable as "Income from Other Sources" in the hands of the recipient — not as salary, because the recipient is the family member, not the employee.

The standard deduction under Section 57(iia) of the Income-tax Act, 1961 allows a deduction of: The lower of: one-third of family pension received, OR Rs. 25,000 per year

The Rs. 25,000 cap (enhanced from Rs. 15,000 by the Finance Act, 2024) applies for FY 2026-27 (AY 2027-28).

Applying Priya's numbers:

• Annual basic enhanced family pension: Rs. 39,000 × 12 = Rs. 4,68,000
• One-third of Rs. 4,68,000 = Rs. 1,56,000
• Section 57(iia) deduction available = Rs. 25,000 (the lower figure)
• Net taxable family pension: Rs. 4,68,000 − Rs. 25,000 = Rs. 4,43,000

This Rs. 4,43,000 is added to Priya's other income and taxed at her applicable slab rate. Note: the DA component of pension is also taxable in the same manner.

NPS Corpus Lump Sum

The lump sum NPS corpus paid to a nominee on the death of a subscriber is not chargeable to tax in the nominee's hands. Confirm the exact exemption provision applicable for AY 2027-28 with your tax advisor, since Income-tax provisions relating to NPS exits continue to be updated through Finance Acts and CBDT circulars.

Annuity Payments

If Priya uses any portion of the corpus to purchase an annuity, annuity payments are fully taxable as income in the year received. There is no exemption or special deduction for annuity income under either the old or new regime.

Old vs. New Tax Regime

Under the new tax regime (Section 115BAC), the Section 57(iia) deduction is available because it is a deduction in computing income under "Income from Other Sources" — not a Chapter VI-A deduction that the new regime explicitly removes. However, other deductions (80C, 80D, house rent allowance, etc.) are unavailable. If Priya has significant other deductions, compare tax liability under both regimes before making the annual regime choice.

Common Mistakes That Delay or Derail Claims

These errors appear consistently in practice. Each one is avoidable.

• No nomination registered with the CRA. This is the most consequential mistake. Without a CRA nomination, the corpus cannot be released to the family until they obtain a succession certificate from a civil court — a process that itself takes months and costs legal fees. Check and update your CRA nomination annually without exception.

• FIR filed in the wrong jurisdiction. The FIR must be lodged at the station having jurisdiction over the employee's last known location, not the family's home address. Jurisdictional mismatches create inter-police complications that delay the six-month status report.

• Employer not notified promptly. Delay in formally recording the missing status in service files creates a gap between the FIR date and the employer's record, which pension authorities flag during verification.

• Indemnity bond on incorrectly stamped paper. The bond must be on non-judicial stamp paper of the denomination prescribed by the state of execution. An under-stamped bond is legally defective and will be returned, restarting the indemnity process.

• Forgetting the Tier II account. If the subscriber held an NPS Tier II account (the voluntary savings account), the balance is accessible immediately with no annuity obligation and no six-month wait. Many families leave this money unclaimed simply because they were focused on the Tier I claim.

• Changing the nominee's bank account mid-claim without updating the CRA. CRA credits go only to the bank account on record. A mid-process bank change that is not updated in the CRA system causes a rejected NEFT transfer and adds weeks of reconciliation.

• Assuming the Section 57(iia) deduction was removed by the new tax regime. It was not. Families filing under the new regime continue to be entitled to the Rs. 25,000 standard deduction on family pension income. Over-paying tax on pension for multiple years because of this misconception is a common and entirely avoidable error.

• Not proactively requesting the six-month police status report. The police will not volunteer this document. The family must formally request it in writing, keep the written acknowledgment, and follow up. Without it, no pension authority will advance the file.

Preventive Steps: What Subscribers and HR Teams Should Do Now

Addressing a missing-employee claim during the crisis is far harder when the groundwork was never laid. These steps, taken today, can compress a months-long ordeal into a smoother, faster process.

1. Annual nomination review on the CRA portal. Log in to enps.nsdl.com (Protean eGov) or the KFin eNPS portal (depending on your assigned CRA) and verify that the nominee's name, relationship, PAN, and bank account details are current. Do this every April alongside your tax filing.

1. Brief your nominee directly. Your spouse or nominated family member should know your PRAN number, the name of the CRA assigned to your account, your employer's Nodal Office contact, and the name of your PoP if you are an All-Citizens subscriber. Write this down and store it with your important documents.

1. HR compliance kit. HR teams at corporate NPS employers should maintain a ready checklist of the missing-employee claim process, the CRA portal steps for Nodal Office withdrawal initiation, and the contact details for the applicable pension authority. Update this kit whenever PFRDA issues new circulars.

1. Life-event KYC updates. Marriage, divorce, birth of a child, death of an existing nominee — each requires a fresh nomination update at both the employer level and the CRA portal. An outdated nominee creates a succession-certificate detour during an already difficult period.

1. Encourage Tier II account awareness. If the subscriber has a Tier II account, ensure the nominee knows about it. Tier II balances are often entirely overlooked during the crisis of a missing-employee event.

Key Takeaways

• The FIR date is Day Zero. Every subsequent timeline — the six-month waiting period, the pension sanction, the corpus release — is measured from the FIR date. File it as soon as the employee is confirmed missing, not after deliberation.

• Two separate claims run simultaneously. The monthly family pension (routed through CPAO or state treasury) and the NPS Tier I corpus withdrawal (routed through the CRA via the Nodal Office) are processed by entirely different authorities. Pursue both in parallel from Step 4 onwards to avoid sequential delays.

• On missing or death, 100% corpus withdrawal is permitted. Unlike superannuation, where 40% must be annuitised, a nominee claiming on account of a subscriber's death or missing status can take the full Tier I corpus as a lump sum. This distinction matters enormously for financial planning.

• Section 57(iia) reduces tax on monthly pension. For AY 2027-28, the standard deduction on family pension income is the lower of one-third of pension received or Rs. 25,000 per year. This deduction is available under both old and new tax regimes and reduces the tax burden every year the pension is received.

• DCRG, leave encashment, and CGEGIS are available alongside NPS. Do not treat NPS as the only entitlement. Government employees' families can simultaneously claim death gratuity (up to Rs. 20 lakh as notified), leave encashment, and group insurance — all largely tax-exempt in the recipient's hands.

• A missing nomination is the costliest administrative oversight. It is the one factor most likely to add six to twelve months to an already painful process. A thirty-minute annual review on the CRA portal eliminates this risk entirely.

• The indemnity bond is protective, not punitive. It simply ensures that benefits are returned if the employee resurfaces. It does not reduce entitlements, impose periodic compliance costs, or carry any criminal exposure for the claimant who receives benefits in good faith.