New NPS Rule on Eligibility to Receive Lump Sum Compensation on Disablement

The government has announced a new set of National Pension System (NPS) rules concerning the lump sum payment compensation. These new rules apply to employees covered under NPS to retain them in government service despite disability attributable to government service as per Rule 9(3) of CCS (Extra Ordinary Pension) Rules, 1939.

The new set of rules state that if a government employee appointed on or after 1 January 2004 and covered under NPS is disabled, he/she will be eligible to receive a lump sum compensation computed according to Rule 9(3) of CCS (EOP) Rules. This is effective when the disablement is attributable to government service, and the employee is retained in service despite such disablement.

Existing Provisions

Due to the introduction of the National Pension System effective from 1 January 2004, rules such as the CCS (Pension) Rules, 1972 and CCS (EOP) Rules, 1939 were amended such that the provisions of these rules will not apply to government employees appointed on 1 January 2004 or after this day.

Based on the employees’ difficulties covered under the NPS, the government had issued orders to extend the benefits of invalid pension, disability pension provisionally, and family pension under CCS (Pension) Rules and CCS (EOP) Rules. The pension benefits are to be given to employees who are discharged from service on invalidation, disability, or death during service. Representations and references were received for such an extension of benefits. 

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As per the provisions stated under Rule 9(3) of CCS (EOP) Rules that apply to government employees appointed before 1 January 2004, a lump sum compensation is to be paid to the employee if he/she is retained in service despite the disablement attributable to government service. Such compensation will be arrived at after considering the capitalised value of the disability element of disability pension regarding the prevalent commutation table.

Note that the disability pension was available to employees covered under NPS only on being suspended from service on account of disability attributable to government service. However, the benefit under Rule 9(3) of the CCS (EOP) Rule is no more valid to employees covered under NPS if he/she is retained in service despite disablement attributable to government service.

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in

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