Finance of the Authority: Grants, the Pension Regulatory and Development Fund and Tax Exemption (Sections 34, 39 and 40)

A regulator needs money to function, and how it is funded affects both its independence and its accountability. The PFRDA Act provides three sources: Government grants voted by Parliament (Section 39), fees and charges from the regulated sector, and other sums approved by the Government, all credited to the Pension Regulatory and Development Fund (Section 40). Section 34 exempts the Authority from tax on its income and wealth.

1. Grants by the Central Government (Section 39)

Section 39, PFRDA Act, 2013

The Central Government may, after due appropriation made by Parliament by law in this behalf, make to the Authority grants of such sums of money as that Government may think fit for being utilised for the purposes of this Act.

Parliamentary appropriation: grants can be made only after Parliament appropriates the money by law, as required by Article 114 of the Constitution for withdrawals from the Consolidated Fund of India.
Discretion: the amount is for the Central Government to decide.
Purpose: grants may be used only for the purposes of the Act.
Early years: grants were important while the system was small and fee income limited; as the sector grew, fees became more significant.

2. The Pension Regulatory and Development Fund (Section 40)

Credits (Section 40(1))

(a) all Government grants, fees and charges received by the Authority;
(b) all sums received from such other sources as the Central Government may decide.

Application (Section 40(2))

(a) the salaries, allowances and other remuneration of the Chairperson, members, officers and employees;
(b) other expenses of the Authority in discharging its functions and for the purposes of the Act.

The Fund is the Authority's operating fund. Its sources and uses are both defined by the Act, so the Authority cannot raise money from sources the Government has not approved, nor use the Fund for purposes outside the Act.

3. Fees and Charges

Power: under Section 14(2)(m), the Authority may levy fees and other charges for carrying out the purposes of the Act.
Examples: registration and renewal fees for intermediaries, and annual or regulatory fees, such as a fee linked to assets under management, specified in regulations.
Limits: fees must bear a reasonable relationship to the regulatory purpose. A levy that amounts to a tax would require express legislative authority, because no tax may be levied except by authority of law under Article 265.

⚠ Note

Fees charged to intermediaries are ultimately borne, at least in part, by subscribers through the charges they pay. The Authority's own funding needs therefore have to be balanced against its duty under Section 14(2)(e) to keep the costs of the system reasonable.

4. Two Funds, Two Purposes

Pension Regulatory and Development Fund (Section 40): grants, fees, charges and approved sums; used for the Authority's salaries and expenses.
Subscriber Education and Protection Fund (Section 41): penalties, grants, donations and investment income; used only for subscriber protection and education.
Why separate: penalties do not finance the regulator, which removes any incentive to impose penalties to raise revenue.

5. Exemption from Tax (Section 34)

Section 34, PFRDA Act, 2013 (substance)

Notwithstanding anything contained in the Wealth-tax Act, 1957, the Income-tax Act, 1961, or any other enactment for the time being in force relating to tax on wealth, income, profits or gains, the Authority shall not be liable to pay wealth-tax, income-tax or any other tax in respect of its wealth, income, profits or gains derived.

Overriding effect: the non-obstante clause gives Section 34 priority over the tax laws named and any other law on taxes on wealth or income.
Scope: wealth-tax, income-tax and any other tax on wealth, income, profits or gains.
Later changes in tax law: wealth-tax was abolished from 2015-16, and the Income-tax Act, 1961 was replaced by the Income-tax Act, 2025 from 1 April 2026. The exemption continues to apply to income tax under the new Act, since Section 34 also covers "any other enactment" relating to tax on income, and references to repealed laws are read as references to their replacements.
Not indirect taxes: the exemption is limited to taxes on wealth, income, profits or gains, so it does not extend to taxes such as GST on services.

The rationale is that the Authority is a statutory body performing public functions with public money. Taxing it would merely move money from one Government account to another. Similar exemptions exist for other statutory regulators.

6. Financial Autonomy and Accountability

Autonomy: fee income gives the Authority a degree of financial independence from annual Government grants, which supports regulatory independence.
Accountability: the Fund's sources are controlled by Parliament and the Central Government, its accounts are audited by the CAG, and they are laid before Parliament (Section 42).
Returns and reports: the Authority reports to the Government on its activities and finances under Section 46.

⚠ Key point

Under Section 39, the Central Government may give the Authority grants after appropriation by Parliament, for the purposes of the Act. Under Section 40, all grants, fees and charges, and sums from other Government-approved sources, are credited to the Pension Regulatory and Development Fund, which pays salaries and other expenses of the Authority. Fees are levied under Section 14(2)(m). Penalties go instead to the Subscriber Education and Protection Fund (Section 41). Under Section 34, notwithstanding the tax laws, the Authority pays no wealth-tax, income-tax or other tax on its wealth, income, profits or gains; the exemption continues under the Income-tax Act, 2025.

7. Related Topics and Provisions

Accounts and audit (Section 42)
Subscriber Education and Protection Fund (Sections 29 and 41)
Central Government control: returns and reports (Sections 43 to 46)
Taxation of the NPS