NPS – National Pension System FAQ on Exit and Withdrawal from NPS

However, eligibility & terms of Voluntary retirement are defined/ governed by service rules and regulations of the respective organization.

Minimum Annuitisation- 80% of accumulated wealth.

Maximum Lump sum Withdrawal- 20% of accumulated wealth.

If the accumulated pension wealth of the subscriber is equal to or less than one lakh rupees or a limit to be specified by the Authority, such subscriber shall have the option to withdraw the entire accumulated pension wealth without purchasing any annuity.

b).   In Case of disability/incapacitation   of subscriber

Minimum Annuitisation- 40% of accumulated wealth.

Maximum   Lump   sum   Withdrawal –  60%  of Accumulated wealth.

Authority has also notified regulations under PFRDA(exit and withdrawal under  NPS) (third amendment) 2018, for facilitating normal exit from NPS to the subscribers with disability and incapacitation during the accumulation  phase, if employer certifies that the subscriber has been discharged from the services of the concerned office on account of invalidation or disability.

Minimum Annuitisation-   40% of accumulated wealth.

Maximum Lump sum Withdrawal- 60% of accumulated wealth.

The Subscriber may choose to purchase an annuity for an amount greater than 40 percent also.

If the accumulated pension wealth of the subscriber is equal to or less than two lakh rupees, or a limit to be specified by the Authority, such subscriber shall have the option to withdraw the entire accumulated pension wealth without purchasing any annuity.

2. If the family member opts for family pension, as per regulations all the accumulated wealth shall be transferred to the bank account of the nodal office for further settlement as per government directives.

3. However –  our exit regulations say (not applicable as mentioned above)

i. In case of Death:

Minimum Annuitisation- 80% of accumulated wealth.

Maximum   Lump   sum   Withdrawal-  20%   of accumulated wealth.

4. If the accumulated pension wealth of the subscriber is equal to or less than two lakh rupees, or a limit to be specified by the Authority, such nominees/legal heirs shall have the option to withdraw the entire accumulated pension wealth without purchasing any annuity.

The lump sum can be deferred till the age of 70 years which   can   be   withdrawn   at   any   time   superannuation and 70 years of age or every year till age of 70 years.  The  subscriber  has  to  give  in  writing (intimation to the employer) in the specified form at least fifteen  days  before the attainment  of   age of superannuation and same should be authorized by the associated Nodal office in the CRA system. If deferment is availed by the subscriber, subscriber has to bear the maintenance charges like CRA, PFM etc.

Annuity purchase can also be deferred for maximum period of 3 years. The subscriber has to give in writing (intimation to the employer) at least fifteen days before the attainment of  age  of  superannuation  and  same should be authorized by the associated Nodal office in the  CRA system.

If the death of the subscriber occurs before such due date of purchase of an annuity after the deferment, the annuity shall mandatorily be purchased by the spouse.

In such scenario, subscriber has to shift his/her PRAN to any POP or e-NPS.  Nodal office shall not assist in uploading of contribution after the date of superannuation. Subscriber has to operate account in his/her individual capacity only.

Such option shall be exercised at least fifteen days prior to the age of attaining sixty years or age or superannuation, as the case may be, and same should be authorized by the associated Nodal office in the CRA system.

Such subscriber who has not exercised the option within the period of fifteen days, so stipulated, but desires to continue with his individual pension account under National Pension System, beyond the age of sixty years or the age of superannuation, as the case may be, and to the extent so permitted, may do so by making an application in writing with reasons for such delay to the National Pension System Trust, within one hundred and eighty days of attaining such age or superannuation. Where an application is received by the National Pension System Trust, from any subscriber, beyond the period of one hundred and eighty days, together with justification and sufficient cause, so shown by the subscriber, the National Pension System Trust, shall cause to forward such application along with its recommendation thereon, for consideration and approval of the Authority.

Subscriber has to bear the maintenance charges like PoP, CRA PFM etc.

Upon exit from Tier-1 account, the Tier-2 account gets closed automatically.

A subscriber can contribute to his Tier 2 account till the time he has an active Tier 1 account.

a. Default  scheme:   Annuity  for life of the subscriber and his or her spouse  (if any) with provision for return of purchase price of the annuity-     After the demise  of such subscriber, the annuity will be re-issued  to the family members  in the order specified hereunder:

b.   living dependent  mother;

C.   living dependent father.

After the coverage  of all the family  members specified  above, the purchase  price shall be returned  to the surviving  children  of the subscriber  and in the absence  of children, the legal heirs of the subscriber,  as may be applicable.

If subscriber  does not want to purchase default  annuity scheme, he may choose any of the following schemes:

b.  Annuity   for  life with  return  of purchase   price(amount   given  to annuity   service   provider) on death– Employee  shall get annuity  (monthly pension)  till he/she  is alive and payment  of annuity  ceases  on the death and the purchase price is returned  to the nominee.

c. Annuity   guaranteed   for  5,10,   15 or 20 years and for  life thereafter

 • On death  during   the guarantee   period  – Employee  shall get annuity  and after his/her death during the guaranteed  period, annuity is paid to the nominee  till the end of the

Guaranteed period after which the same ceases and no return of purchase price to the nominee.

•   On death  after  the guarantee period  – Employee  shall get payment  of annuity till he/she  is alive even after the guaranteed  period and annuity  ceases  after his/her death and no return of purchase  price to nominee.

d. Annuity   for  life  – Employee  shall get payment of annuity till he/she  is alive & payment  of annuity  ceases  on death and no return of purchase price to nominee.

e. Annuity for life increasing at simple rate of 3% p.a.  Employee shall get payment of annuity till he/she is alive & payment of annuity ceases on death and no return of purchase price to nominee.

f.    Annuity   for  life with  a provision for 50% of the  annuity  to the spouse  of the annuitant for life  on death  of the annuitant- Payment of annuity  ceases  on death of subscriber  and 50% of the annuity is paid to the surviving named spouse  during  his/her  life time.  If the spouse predeceases the annuitant, payment of annuity will cease after the death of the annuitant.  It can be with or without return of purchase price.

g.   Annuity   for  life with  a provision    of 100% of the  annuity   payable  to spouse  during   his/her lifetime on death  of the  annuitant.- Payment of annuity  ceases after death  of the annuitant and full annuity is payable  to the surviving named  spouse during  his/her  life time. If the spouse predeceases the annuitant, the annuity ceases after death of the annuitant.  It can be with or without return of purchase price.

Subscriber   can also  add  spouse  in any  of the  variants (Other than default) above.

All ASPs may not provide all the variants. It may vary from ASP to ASP.

Pricing of annuity also varies ASP to ASP.

https:llwww.npscra.nsdl.co.in/annuity-service-providers.php

2. SBI Life Insurance Co. Ltd.

3. ICICI Prudential Life Insurance Co. Ltd.

4. HDFC Standard  Life Insurance  Co Ltd

5. Star Union Dai-ichi  Life Insurance  Co. Ltd

*Subject   to change from time to time.

1. The subscriber  shall have been in the National Pension  System  at least for a period  of three years from the date of his or her joining;

2.   Withdrawal is allowed for some specific purposes only.

a.  For the higher education  of  children

b.   For the marriage  of children

c.  For the purchase/construction of residential house or flat in his or her own name or in a joint name with his or her legally wedded  spouse.  In case, the subscriber already owns either individually or in the joint name a residential house or flat, other than ancestral property, no withdrawal under these regulations shall be permitted.

d. Treatment  for prescribed  illnesses – suffered  by subscriber,  his legally wedded spouse,  children including  a legally adopted child and dependent parents.

Prescribed  illnesses  includes: (i) Cancer;

(ii) Kidney  Failure (End Stage Renal Failure);

(iii) Primary  Pulmonary  Arterial Hypertension; (iv) Multiple  Sclerosis;

(v) Major Organ Transplant;

(vi) Coronary  Artery  Bypass Graft; (vii) Aorta  Graft Surgery;

(viii) Heart Valve Surgery;

(ix) Stroke;

(x) Myocardial Infarction

(xi) Coma;

(xii) Total blindness;

(xiii) Paralysis;

(xiv) Accident of serious/ life threatening nature.

(xv) Any other critical illness of a life threatening nature as stipulated in the circulars, guidelines or notifications issued by the Authority from time to time.

e. To meet medical and incidental expenses arising out of the disability or incapacitation suffered by the subscriber.

f.Towards  meeting  the expenses  by subscriber  for skill development/re-skilling  or for any other self-development  activities, as may be permitted  by the Authority  by issuance  of appropriate guidelines,  in that behalf

g. Towards  meeting  the expenses  by subscriber  for establishment   of own venture or any start-ups, as may be permitted  by the Authority  by issuance  of appropriate guidelines,  in that behalf.

Employee’s  own Contribution-  Eligible for  tax deduction  under  sec 80 CCD  (1) of Income  Tax Act  up to 10% of salary  (Basic  + DA) within  the  overall  ceiling of Rs. 1.50 Lacs under Sec. 80 C of the Income Tax Act. From   F.Y.   2015-16, subscriber will be allowed   tax deduction in addition to the deduction allowed under Sec. 80CCD(1) for contribution in  his  NPS account   subject to maximum  of  Rs. 50,000/- under sec. 80CCD 1(B).

Employer’s contribution: Upto 10% of Basic & DA (no   upper monetary ceiling) under 80CCD (2). This rebate is over and above 80 C. (This tax benefit is only Available for NPS subscribers).

II. Partial Withdrawal- Tax free.

III. Lump sum Withdrawal-   In case of superannuation,   lump sum withdrawal (40 % of the accumulated corpus)   is tax free.

IV. Annuity- Amount utilized for purchase of annuity is not taxable in the hands of the subscriber.

Employer   can  withhold   its  co-contribution    along  with income   accrued  on   it  under   Tier-I   account   of  the subscriber  and the investment  income accruing  thereon, for the purpose  of recovery  of the whole  or part of any pecuniary  loss caused,   provided    such  loss    is established,  in any departmental  or judicial  proceedings, initiated   against  such  subscriber  by  the  employer concerned

2. Right of withholding  shall  have to be exercised  prior to the date of superannuation of the subscriber,  pursuant to a notice to be given to the National  Pension  System Trust  or an entity to whom  such authorization   has been given,  and seeking  to withhold  the said pension  wealth of such subscriber. Upon such right of withholding  being validly exercised-

i.  the pension wealth which are payable under the National  Pension System shall not be paid to such subscriber until the conclusion  of the departmental  or judicial proceedings,  as the case may be and subject to the final orders, passed  in such proceedings.

ii. the amount withheld  as specified  in sub-clause (i) shall remain subscribed  to the scheme  in the mode and manner  in which  it was held prior to resorting  to such action by the employer specified,  and the final settlement  of the withheld amount  shall be made by the National  Pension System Trust, or any intermediary  or other entity, authorized  for this purpose  by the Authority, in normal course within  ninety days of the receipt of an appropriate  order from the concerned employer;

iii.  the amount withheld  becomes  payable to the subscriber  on the final settlement,  as certified  by the employer  specified,  which has sought withholding  of such benefits,  and shall be paid to the subscriber  as soon as possible  and in no case  beyond ninety days of receipt  of the final order by the National Pension  System  Trust or any other entity or person, authorized  for the purpose  by the Authority;

he expression  “family”,

i. in relation to a male subscriber,  means  his legally wedded  wife, his children,  whether married or unmarried,  his dependent parents and his deceased  son’s widow  and children;

ii. in relation to a female  subscriber,  means her legally wedded  husband,  her children, whether married or unmarried,  her dependent  parents, her husband’s dependent  parents  and her deceased  son’s widow and children;

Explanation  II — In either of the above two cases, if the child of a subscriber  [or as the case may be, the child of a deceased  son of the subscriber]  has been adopted by another person  and if, under the personal  law of the adopter,  adoption  is legally recognized, such a child shall be considered  as excluded  from the family of the subscriber.