The Pension Fund Regulatory and Development Authority (PFRDA) has updated the investment guidelines for the National Pension System (NPS) to allow NPS investments in rupee-denominated bonds issued by the New Development Bank (NDB).
The guidelines which came into effect from May 13, 2026, will apply to both government and private sector NPS investments. This is a change from the policy where NPS funds could invest only in rupee-denominated bonds issued by the International Bank for Reconstruction and Development, the International Finance Corporation and the Asian Development Bank.
According to the latest circular issued by PFRDA on May 13, 2026, the range of investment options for both government and non-government sector NPS schemes has now been broadened to include NDB-issued rupee-denominated bonds.
What is the new update in NPS investment guidelines?
Earlier, NPS funds could invest in rupee bonds issued by institutions like:
The International Bank for Reconstruction and Development (IBRD)
The International Finance Corporation (IFC)
The Asian Development Bank (ADB)
With the latest amendment, the New Development Bank has also been added to the list of eligible institutions.
What will not change after the PFRDA circular?
PFRDA said that all other conditions, including the current credit rating requirements (AA or above) and applicable maturity specifications outlined in the investment guidelines will not change.
Additionally, the existing investment conditions will also remain unchanged, the pension body said in its circular.
The regulator said that the amended guidelines will come into force with immediate effect.
What is the National Pension System?
The National Pension System (NPS) is a type of pension based on contribution. It’s voluntary for individuals to contribute to their own pension fund that can provide regular income after they retire.
How much is an employer's contribution to an employee’s NPS account?
For corporate employers, the upper limit set for monthly contributions furnished to an employee's account is 10% of their salary (basic + DA), as per the Protean website However, in case of central government employees or bank staff, the thumb rule for employer NPS contribution limit is 14%.
Tax benefits to employees on self-contribution in NPS
If you follow the old tax regime, you can save up to Rs 2 lakh by investing in NPS.
According to the NPS Trust website, employees who contribute to NPS can enjoy the following tax benefits on their contribution:
Tax deduction up to 10% of salary (Basic + DA) under Section 80 CCD(1) within the overall ceiling of Rs 1.50 lakh under Section 80 CCE.
Tax deduction up to Rs 50,000 under Section 80 CCD(1B) over and above the overall ceiling of Rs 1.50 lakh under Section 80 CCE.
Tax benefits to employees on employer's NPS contribution
Section 80CCD(1): Employee contributions eligible for deduction up to:
10% of salary (Basic + DA)
20% of gross income for self-employed
(Subject to Rs 1.5 lakh limit under Section 80CCE)
Section 80CCD(1B): Additional tax deduction of Rs 50,000
Section 80CCD(2): Employer contributions deductible up to:
10% of salary for employees under old tax regime
14% of salary for employees under new tax regime
What is the New Development Bank?
Set up in 2015 by BRICS countries, the New Development Bank (NDB) is a multilateral development bank aimed at mobilising resources for infrastructure and sustainable development projects in BRICS and other EMDCs.
