NPS Exit and Withdrawal Rules 2021
NPS exit and withdrawal rules for 2021 have changed.
Let’s understand these new rules in this article
I will explain first the basics of NPS in this article.
Basics of NPS…
The government of India launched NPS ( new pension scheme) for Indian Citizens.
This fund creates a retirement corpus for the people who invested in it.
In addition, Pension Fund Regulatory Development and Authority (PFRDA) manages NPS.
and in this fund, Non Residents are also can invest.
Any person who has a sound mind and having of 18 to 60 years and who does not have an existing NPS account can open and invest in NPS.
Asset Class Choices in this NPS are…
There are three asset classes available to invest in NPS.
The names of the three asset classes are 1. Equity ( E ) 2. Government Bonds ( G ). 3. Corporate bonds ( C ) ( other than government bonds ).
Investment Choices are available to invest in NPS…
There are two investment choices available in NPS are…
1) Active Choice…
In this option, You can choose to invest in asset classes Equity, govt bonds, and corporate bonds.
If you would like to invest in equity, then the maximum amount that you can invest is up to 75%.
But this limit was 50% earlier.
2) Auto Choice…
In this option, you can not select the exposure % and asset class,
In addition, NPS will invest your money based on pre-defined formulae depending on your age.
To understand this auto choice, read this article ( 100 – age ) formulae.
But, there is no guarantee for the returns in NPS.
and, The returns are based on market returns.
Funds that manage NPS retirement funds are…
PFRDA appointed 6 fund houses to manage the retirement corpus in NPS.
- Annuity Service Provider ( ASP),
- Icici prudential Pension Fund Management Private Limited.,
- Kotak Mahindra Pension Fund Limited.
- Reliance Capital Pension fund limited.
- Sbi Pension Funds Limited.
- Uti Retirement Solutions Limited.
What are Latest NPS Exit and Withdrawal Rules for the year 2021?…
There are three Scenarios available.
- After attaining the age of 60 years, and 2) before age of 60 years and 3) after the death of the NPS subscriber.
1) NPS exit, After attaining the age of 60Years…
Once the subscriber attains the age of 60 in NPS can withdraw 60% of the corpus accumulated.
In addition, he has to buy an annuity plan for the remaining 40% corpus from a Life Insurance Company to get the pension.
However, the subscriber has the option to opt for a phased withdrawal from ( 60%) of the fund in 10 equal installments from age 60 to 70 ful
lumpsum amount ( 60%) as prescribed by the employer.
But before opting for the above withdrawal, the subscriber has to buy the annuity first.
2) Death of the Subscriber before getting pension age ( Superannuation)…
In case of death of the NPS Subscriber, the entire accumulated retirement corpus will be paid to the nominee or the legal heir.
and, the claimant or the nominee should submit the following documents.
- Original pan Card.
- and KYC documents ( Id and Address Proof).
- In addition, Advanced Stamped Receipt, which should be filled and signed across the revenue stamp by the claimant.
- and, Cancelled Cheque of the Claimant which contains Full name of the claimant, Branch, IFSC code, and Bank Account number.
- Finally, Claimant should submit the original death certificate issued by the Registrar of Births and Death.
If there is more than one nominee…
In case of multiple nominees in the NPS pension account, then
- All the nominees registered in the CRA system should apply for the NPS withdrawal.
- If any nominee doesn’t want to apply for NPS withdrawal has to submit a relinquishment deed on Rs.100 notarized stamp paper.
and the nominee who wants to claim the NPS corpus should submit Indemnity Bond notarised on Rs.100 stamp paper
3. In case one nominee is a major, the major will submit the withdrawal form to claim NPS corpus, and in the case the minor nominee, the guardian of
the nominee will claim the NPS corpus by submitting minor age proof.
NPS exit rules for 2021 Prior Retirement ( i.e before 60 years age)…
If you would like to withdraw money from the NPS corpus before the superannuation age i.e before retirement, You are not allowed to withdraw the full amount.
As you are allowed to withdraw a partial amount, this option is called a partial withdrawal option.
In addition, after partial withdrawal, you are allowed to continue your NPS account.
You are allowed to withdraw 25% of the corpus at any time ( excluding employer contribution as on the date of withdrawal).
But there are few points that should be remembered.
- You should complete 3 years in the NPS to withdraw the NPS corpus.
- In addition, you can withdraw up to 25% of the contributions made by you as of the date of submitting withdrawal.
- However, You can make a maximum of 3 withdrawals in the entire period.
- You should submit a withdrawal request to the central recording keeping agency or National Pension System Trust with all necessary documents in a prescribed format as may be specified to process the partial withdrawal request.
- In case you are suffering from a disease, then your family member can submit the request.
- When it comes to Tier -II account, you are allowed both partial and full withdrawal without any conditions.
Purpose of Partial withdrawal…
Conditions for partial Withdrawals are.
- Partial withdrawal is allowed for the higher education of the child (including a legally adopted child) including self higher education.
- In addition, you can withdraw for the marriage purpose of a child ( including a legally adopted child).
- You can withdraw from NPS if you are looking to set up a business or looking to acquire a business.
- In addition, You are allowed for a partial withdrawal for buying a house or flat, the house or flat should be in a single name or joint name along with your wife.
- However, If you have already had a house apart from the ancestral house or flat in single or jointly with your spouse, then partial withdrawal is not allowed.
- If you or your spouse, children, legally adopted children, and your dependant parents are suffering from a disease, then partial withdrawal is allowed.
- In the above case, you or your family member can submit the withdrawal request.
- Moreover, the following deceases are allowed for partial withdrawals in case of hospitalization and treatment is required.
The deceases which are eligible for partial withdrawal…
- Major Organ Transplant,
- Total Blindness,
- Heart Valve Surgery,
- primary Pulmonary Arterial Hypertension,
- Multiple Sclerosis;
- Myocardial Infarction;
- Aorta Graft Surgery
- Kidney Failure (End Stage Renal Failure);
- Coronary Artery Bypass Graft,
- An accident of serious/ life-threatening nature,
- 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.
- In addition, Such advance withdrawal will not attract any taxation. Hence, there is no tax liability for such advance withdrawal.
The subscribers can apply both offline and online for partial withdrawals.
Exiting from the NPS before 60 years of age is possible/
But you should opt for the pension for 80% of the corpus and the remaining 20% can be withdrawn completely.
In addition, for exiting the NPS, if your NPS is 10 years old account only.
However, If your NPS corpus less than or equal to 1 lakh, you can withdraw the entire NPS corpus.
In my view, The NPS account is not good for accumulating the retirement corpus. Read this article to know more.