NPS Death Benefits

Death Benefits for Different Types of Subscribers

The NPS benefits after death vary based on the subscriber category and the accumulated pension wealth, as shown below:

Process to Claim NPS Death Benefits

After the death of a National Pension Scheme (NPS) subscriber, the nominee or legal heir can initiate an NPS death claim to receive the applicable payout. The process generally involves the following steps:

1. Notify the Authority: Inform the associated Point of Presence (PoP), Nodal Office, or employer about the subscriber’s death.
2. Submit the Claim Form: Obtain and complete the official NPS death withdrawal or claim form from the Central Recordkeeping Agency (CRA) or the associated PoP.
3. Submit the Required Documents: Provide the necessary documents, such as:
   • Death certificate of the subscriber
   • PRAN card or PRAN details
   • KYC documents of the nominee or legal heir
   • Bank account proof, such as a cancelled cheque or bank statement
   • Legal heir or other succession-related documents, where required, may be submitted if a valid nomination cannot be established.
4. Verification and Settlement: The PoP or Nodal Office verifies the submitted documents claiming NPS death benefits and forwards them to the CRA for processing. Once approved, the applicable funds are transferred to the nominee’s or legal heir’s bank account.

For assistance to get the benefits of NPS after death, the nominee(s) or legal heir(s) should contact the concerned PoP, nodal office, CRA or NPS Trust through the applicable official grievance-redressal channel.

Tax Benefits for NPS Contributions

The scheme is a popular retirement savings option that provides specific NPS tax benefits for contributions made to the scheme.

For Example,

Meena, a 40-year-old salaried professional with a Basic + DA of ₹10,00,000, contributes ₹1,50,000 of her own money to NPS, an additional ₹50,000 voluntarily, and her employer contributes ₹1,00,000.

• Deduction on her own contribution:₹1,00,000, as the applicable deduction is limited to 10% of her ₹10,00,000 salary.
• Deduction on the additional voluntary contribution: ₹50,000.
• Deduction on the employer's contribution: ₹1,00,000, subject to the applicable provisions.
• Total tax deduction: ₹2,50,000.

NPS Death Payout Rules

The payout from an NPS account after the subscriber’s death depends on the subscriber’s sector, accumulated pension wealth and applicable NPS rules.

Private Sector / Non-Government Subscribers

• Entire NPS corpus: Up to 100% of the accumulated pension wealth may be paid as a lump sum to the nominee(s) or legal heir(s).
• Other payout options: The nominee(s) or legal heir(s) may instead opt for systematic lump sum withdrawal (SLW), systematic unit redemption (SUR), purchase of an annuity or other options approved under the applicable NPS rules.

Government Sector Employees

• Corpus up to ₹8 lakh: The nominee(s) or legal heir(s) may withdraw up to 100% of the accumulated pension wealth as a lump sum or opt for SLW, SUR or another approved payout option.
• Corpus above ₹8 lakh and up to ₹12 lakh: Up to ₹6 lakh may be paid as a lump sum. The balance may be received through SUR for at least six years or used to purchase an annuity. Alternatively, up to 20% may be paid as a lump sum and at least 80% may be used to purchase an annuity.
• Corpus above ₹12 lakh: Up to 20% of the accumulated pension wealth may be paid as a lump sum, while at least 80% must be used to purchase an annuity.

Key Takeaways

NPS is a government-backed scheme, a highly popularpension plan in India that also provides financial support to the nominee or legal heir if the subscriber passes away. The payout rules vary based on the subscriber's sector and the stage at which death occurs. To ensure a smooth claim settlement, subscribers should keep their nominee details updated and ensure their NPS records remain accurate.

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