Tax Exempt NPS Exit and Withdrawals
Contrary to popular belief, if you need money from your Tier I NPS Account, you have that provision. NPS offers you Partial Withdrawal option as well as Early Exit option.
Partial Withdrawal from NPS
You can withdraw up to 25% of the contribution deposited. In the entire life span, up to 3 withdrawals can be made – the first withdrawal can be exercised after 3 years of account opening. 2nd and 3rd withdrawals can be exercised any time after the previous withdrawal. However, this withdrawal comes with certain conditions as mentioned.
Partial withdrawal conditions
Contribution deposited for availing tax benefit u/s 80CCD (1) and 80CCD 1 (B) shall be considered for calculation of withdrawal limit.
25% rule is not on the Corpus but on the contribution amount.
Subsequent withdrawal is allowed only on incremental contribution deposited by you after you have made your previous withdrawal.
Withdrawal is for some specific purpose defined by PFRDA.
Partial withdrawal conditions
Contribution deposited for availing tax benefit u/s 80CCD (1) and 80CCD 1 (B) shall be considered for calculation of withdrawal limit.
25% rule is not on the Corpus but on the contribution amount.
Subsequent withdrawal is allowed only on incremental contribution deposited by you after you have made your previous withdrawal.
Withdrawal is for some specific purpose defined by PFRDA.
Exit from NPS
You can exit from the scheme after 5 years of account opening or on attaining 60 years of age, if you are in Retail NPS model. If you are under Corporate NPS model you can exit from the scheme after 5 years of account opening or on attaining the retirement age defined by your corporate.
Exit on attaining 60 years of age / retirement age defined by your corporate is treated as normal exit (exit on maturity) whereas exit from the scheme before such age is treated as pre – mature exit.
The payout in terms of amount which can be withdrawn or invested in Annuity depends on the age at which you exit the scheme.
Exit conditions on Maturity
You can withdraw up to 60% of Corpus, tax free.
You need to invest the balance amount into Annuity, which is also fully exempt from tax. However, pension received out of investment in Annuity is treated as income and will be taxed appropriately.
If the Corpus is less than or equal to Rs 5 lakhs, you can withdraw the entire amount without any obligation to invest in Annuity.
Pre – mature Exit
You can withdraw up to 20% of Corpus, tax free.
You need to invest the balance amount into Annuity, which is also fully exempt from tax. However, pension received out of investment in Annuity is treated as income and will be taxed appropriately.
If the Corpus is less than or equal to Rs 2.5 lakh, you can withdraw the entire amount without any obligation to invest in Annuity.
Exit rules – if you join NPS after 60 years of age
Yes, you heard it right! You can join NPS after 60 years of age as well.
And guess what – you get the flexibility to exit from the scheme any time. However, exit from the scheme after 3 years of account opening shall be treated as normal exit and exit before 3 years of account opening shall be treated as pre – mature exit.
Exit conditions on Maturity
You can withdraw up to 60% of Corpus, tax free.
You need to invest the balance amount into Annuity, which is also fully exempt from tax. However, pension received out of investment in Annuity is treated as income and will be taxed appropriately.
If the Corpus is less than or equal to Rs 5 lakhs, you can withdraw the entire amount without any obligation to invest in Annuity.
Pre – mature Exit
You can withdraw up to 20% of Corpus, tax free.
You need to invest the balance amount into Annuity, which is also fully exempt from tax. However, pension received out of investment in Annuity is treated as income and will be taxed appropriately.
If the Corpus is less than or equal to Rs 2.5 lakh, you can withdraw the entire amount without any obligation to invest in Annuity.
Exit rules – if you join NPS after 60 years of age
Yes, you heard it right! You can join NPS after 60 years of age as well.
And guess what – you get the flexibility to exit from the scheme any time. However, exit from the scheme after 3 years of account opening shall be treated as normal exit and exit before 3 years of account opening shall be treated as pre – mature exit.
Benefits on exit from NPS on Maturity
Loyalty pays! If you remain invested in NPS till you attain 60 years of age or attain the retirement age defined by your corporate, you get following flexibility (either of one):
Continue with NPS account till 75 years of age
If you opt for this option, you can contribute to your NPS account till 75 years of age and avail tax benefits on your investment.
You can exit from the scheme any time by withdrawing up to 60% of Corpus and investing balance amount in Annuity.
Defer your Annuity purchase
You may not need the annuity immediately on retirement but want the corpus for some emergency need. In such a scenario, you can select this option.
You can defer your Annuity purchase till 75 years of age. You will have to withdraw the balance corpus immediately.
Your account will be blocked for any future investment. However, your existing corpus which you have deferred for Annuity purchase keeps on growing as per market. Before 75 years of age, you can decide to purchase Annuity anytime.
Defer your Withdrawals
You may not need the Corpus immediately on retirement but want your Annuity to start immediately. In such a scenario you can select this option.
You can withdraw the entire amount before attaining 75 years of age either in lump sum or in installments (maximum 10 installments are allowed).
Your account will be blocked for any future investment. However, your existing corpus which you have kept for withdrawal at a later stage keeps on growing as per market.
Continue with NPS account till 75 years of age
If you opt for this option, you can contribute to your NPS account till 75 years of age and avail tax benefits on your investment.
You can exit from the scheme any time by withdrawing up to 60% of Corpus and investing balance amount in Annuity.
Defer your Annuity purchase
You may not need the annuity immediately on retirement but want the corpus for some emergency need. In such a scenario, you can select this option.
You can defer your Annuity purchase till 75 years of age. You will have to withdraw the balance corpus immediately.
Your account will be blocked for any future investment. However, your existing corpus which you have deferred for Annuity purchase keeps on growing as per market. Before 75 years of age, you can decide to purchase Annuity anytime.
Defer your Withdrawals
You may not need the Corpus immediately on retirement but want your Annuity to start immediately. In such a scenario you can select this option.
You can withdraw the entire amount before attaining 70 years of age either in lump sum or in installments (maximum 10 installments are allowed).
Your account will be blocked for any future investment. However, your existing corpus which you have kept for withdrawal at a later stage keeps on growing as per market.
Death Benefit under NPS
Death Benefit under NPS
In such unforeseen incident during accumulation phase, your nominee / legal heirs can claim the Corpus. In case of death post investment in Annuity, the death benefit shall be as per the Annuity scheme selection.
Death Benefit under NPS
In such unforeseen incident during accumulation phase, your nominee / legal heirs can claim the Corpus. In case of death post investment in Annuity, the death benefit shall be as per the Annuity scheme selection.
