How to Close NPS Account: Exit Rules for NPS Scheme

nps exit form — (Source: thehindubusinessline)

The Government of India launched the National Pension Scheme or NPS in order to extend a secure future to citizens after their retirement. The process of enrolling into this scheme is extremely simple and straightforward, and so is exiting the scheme.

However, in case you do not know how to close an NPS account, do not worry. This article will delve into the entire procedure.

So, let’s begin!

How to Withdraw Investments from NPS?

Withdrawal rules for the National Pension Scheme vary for different categories:

Subscribers can withdraw thrice during the tenure of their subscription.
A minimum gap of 5 years should be maintained between two withdrawals. Moreover, the scheme allows a reduction in this gap on account of medical emergencies.
An individual can withdraw up to 25% of his/her contribution towards NPS.
To be eligible for partial withdrawals, a subscriber should be a member of the scheme for a period of at least 3 years.
This scheme allows partial withdrawals only in some exceptional cases, such as the education of a subscriber’s children, medical emergencies, construction of a residence, or marriage expenses.

Premature Withdrawals from an NPS Account

NPS Premature Withdrawal Rules for Tier I Accounts

Before 2011, subscribers were subject to a lock-in period till they attained the age of 60 years. However, NPS premature exit rules presently allow subscribers to withdraw prematurely in the form of repayable advances after they complete 15 years of service.

Additionally, after you complete 25 years of service, you are eligible to withdraw up to 50% of your contribution to NPS. However, withdrawals are allowed in the case of critical illnesses and other emergencies or life events that call for financial aid.

NPS Premature Withdrawal Rules for Tier II Accounts

NPS permits unlimited withdrawals for those invested in a Tier II account. As a result, your NPS account acts more like a savings account.

That said, you should be aware that the withdrawal process can be tedious as its Points of Presence (PoP), through which requests are made, are limited in number. Moreover, there is no online portal for withdrawals, which makes the whole process a bit time-consuming.

Partial Withdrawal from an NPS Account

Amount Allowed for a Partial Withdrawal

Contributors can withdraw an amount of up to 25% of their savings. Additionally, you can only make partial withdrawals on the principal amount. Therefore, you cannot withdraw interest earned on your NPS account. So, this scheme allows you to withdraw up to 25% of your contribution to NPS but not the entire account balance.

Time Period for Partial Withdrawal

One can partially withdraw from their NPS account after completing 10 years. In fact, subscribers can avail 3 withdrawals with a gap of 5 years in between each withdrawal.

Additionally, there are instances wherein the 5-year gap rule does not apply. These include the following:

Heart valve surgery
Primary pulmonary arterial hypertension
Coronary artery bypass graft
Stroke
Aorta graft surgery
Cancer
Kidney failure (end-stage renal failure)
Paralysis
Myocardial infarction
Coma
Complete blindness
Major organ transplant
Multiple sclerosis
Life-threatening accidents
Any critical and life-threatening illness as stipulated in the circulars, notifications, or guidelines issued by the authority

Conditions for Partial Withdrawal from an NPS Account

Subscribers can only withdraw partially in the case of the following incidents:

Higher education of children
Treatment for critical illnesses for self, dependent parties, spouse, or children
Fatal accidents
Construction or purchase of the first house (Note: This does not apply to a subscriber with sole or joint ownership of a house or flat, excluding ancestral property)
Child’s marriage

Withdrawal after Maturity

According to NPS norms, you can withdraw the lump sum from this scheme at superannuation or on attaining 60 years of age. One can also delay withdrawal till the age of 70 years. Moreover, the scheme allows subscribers to withdraw up to 60% of their corpus without attracting taxes.

Additionally, it is mandatory to use the remaining 40% of the corpus to purchase an annuity product, which offers monthly pensions to an individual after retirement. Furthermore, taxation for the same does not occur at the time of withdrawal. Instead, you are taxed based on your slab rate in the financial year when pension payouts take place.

How to Request for Investment Withdrawals?

You can exit from NPS digitally by downloading and filling out an application form, which is available on the official website of NSDL. Here, you must know that there are three kinds of NPS forms designed to process exit in the following cases:

Partial withdrawal
Premature exit from NPS
Withdrawal after maturity

Moreover, there is a separate NPS exit form applicable for the death of a subscriber who is a government employee.

Here’s how to exit from the NPS scheme by initiating a withdrawal request:

Step 1: Log in to the CRA system using your PRAN and password.
Step 2: Select the option “Exit from NPS.” Then, click on “Initiate Withdrawal Request.”
Step 3: Enter all necessary details, such as your name, date of birth, gender, address, PAN number, nominee details, and choice of an annuity service provider as well as an annuity scheme.
Step 4: Take a printout of this withdrawal form. Attach a photograph and sign across it. You are also required to sign against the declaration. Then, submit the form along with your KYC documents to the respective Nodal Office (for government employees) or PoP (for corporate employees).

Alternatively, you can take the offline route and visit a Nodal Office or PoP near your location to fill out and submit a physical NPS exit form.

How to Close an NPS Account?

You can close an NPS account online or offline. First, let us elaborate on how to close an NPS account online:

Step 1: Initiate an exit request by logging into the CRA system using your credentials.
Step 2: The site displays messages regarding OTP authentication and authorisation of your request. Here, you should earmark the corpus for annuity/lump sum, nomination details, etc.
Step 3: Upload scanned images of your KYC documents.
Step 4: Authenticate the process by submitting an OTP generated on your registered contact number and email ID.

Alternatively, you can avail of an offline exit from NPS by visiting a Nodal Office or PoP in your vicinity. Then, submit the NPS withdrawal form alongside supporting documents for authorisation.

After the completion of an exit request, a PoP will verify your bank account and cross-examine all details. Thereafter, the CRA system will execute your request.

How to Close an NPS Account before Retirement?

Under NPS, you can opt for a premature exit before retirement or if taking voluntary retirement. However, you should note that it calls for you to have maintained your NPS account for a minimum of 10 years.

Additionally, NPS exit rules mandate you to invest at least 80% of the amount in an annuity. That said, if your accumulated pension is less than ₹1 lakh, you can withdraw the complete amount.

Moreover, you can close your account in the same manner as described above – online through the NSDL website or offline by visiting a Nodal Office or PoP near your location.

With that, we’ve reached the end of this article on how to close an NPS account. We hope that this guide provided a comprehensive understanding of the entire process and answered your question, “Can I exit from NPS?”

Frequently Asked Questions

All

What is an exit in NPS?

In NPS, an exit refers to the closure of an individual pension account by a subscriber.

When can a subscriber exit from NPS?

According to PFRDA Regulations, exit from NPS is allowed on normal superannuation/at the age of 60, before maturity/retirement, or upon the death of a subscriber.

What options for exit from NPS are available for subscribers at the time of superannuation?

A subscriber, upon superannuation, can choose to stay invested in NPS till the age of 70 years by way of continuation of the account or deferment of withdrawal. Or, he/she can take an exit from this scheme and start a pension.

What is an exit claim in NPS?

The scheme generates an exit claim 6 months prior to your date of retirement. It allows you or the Nodal Office to make any necessary change, such as address or date of birth, in the system till one day before your date of retirement. Moreover, you cannot initiate a withdrawal request without the generation of an exit claim.

Can a subscriber claim 100% withdrawal in case of premature exit and superannuation?

In the case of a premature exit, a subscriber can avail of the option of complete withdrawal only if his/her total accumulated corpus amounts to less than ₹2.5 lakhs. On the other hand, a subscriber can claim for 100% withdrawal on superannuation only if his/her total accumulated corpus equates to less than ₹5 lakhs.