How to Close an NPS Account?

How to Close an NPS Account Before 60?

Before turning 60, closing an NPS account comes with certain conditions. Withdrawal rules vary depending on whether you are in the government or non-government sector. Understanding these details helps you make informed decisions.

For Government Sector Subscribers

If you work in the government sector, here's how the process works:

• You can withdraw the entire amount if your total NPS corpus is ₹2.5 lakh or less.
• If your corpus exceeds ₹2.5 lakh, you are required to use at least 80% of the savings to purchase an annuity, which will provide regular pension payments. The remaining 20% can be withdrawn as a lump sum.
• You also have the option to continue your NPS account under the All Citizens Model by shifting through the Inter-Sector Shifting (ISS) facility, if you wish to keep saving.

For Non-Government Sector Subscribers

If you belong to the non-government sector, the rules are slightly different:

• A minimum subscription period of five years is required before you can exit.
• If your total corpus is ₹2.5 lakh or less, you can withdraw the entire amount as a lump sum.
• For a corpus above ₹2.5 lakh, at least 80% of the amount must be used to purchase an annuity, and the remaining 20% can be withdrawn as a lump sum.

What are the Different Choices When the NPS is Due for the Exit?

When you reach the age of 60 and prepare for retirement, you have three main options: continue with your NPS account, defer withdrawals, or exit the account. These choices allow flexibility in managing their retirement savings according to their financial needs.

Continuation of the NPS

You can keep your NPS account active and continue enjoying its benefits until the age of 75. This includes full access to the CRA system, the ability to switch fund managers, and other regular features of the account.

To submit a continuation request:

• Access the CRA system using your User ID (PRAN) and Password.
• Click ‘Exit from NPS.'
• Pick the ‘Request for Deferment' option.
• Enter the necessary details and submit the ‘Continuation' request.
• Get the request authorized by the necessary authorities.

You can also submit a physical continuation request through your Nodal Officer or PoP (Point of Presence). Just make sure to do this at least 15 days before you reach your retirement age. If you miss this deadline, you'll need to get approval from the NPS Trust before submitting your request to the CRA system.

Deferment

You can delay withdrawals and keep your NPS account active until age 75. The options available are:

• Defer only the annuity payments.
• Defer the lump sum withdrawal, with the choice to withdraw it all at once or in parts over up to 15 years.
• Defer both the lump sum withdrawal and the annuity payments.

To file a deferment request:

• Access the CRA system using your User ID (PRAN) and Password.
• Select ‘Exit from NPS' → ‘Request for Deferment'.
• Pick the ‘Request for Deferment' option.
• Alternatively, file the request via your Nodal Officer or PoP before retirement.

You can also submit the deferment request through your Nodal Officer or PoP. The deadline for submitting a deferment request is the same as for filing a continuation request.

Exiting the NPS

If you no longer wish to continue with your NPS account, you can exit by following a few simple steps. Before initiating the withdrawal request, ensure that your account details, such as PAN, address proof, bank details, and nominee details, are updated.

The steps to exit the NPS are as follows:

• Log in to the CRA system using your User ID (PRAN) and Password.
• Click ‘Exit from NPS.'
• Click the ‘Initiate Withdrawal Request' option.
• Enter the details like the choice of annuity service provider and annuity scheme.
• Print the form after successfully submitting the details.
• Fill in the required details in the form and submit it along with KYC documents to the respective Nodal Officer or PoP.
• The authorities will verify the details and grant the sanction online in the CRA.

• If you're unable to initiate the process online, you may complete the form manually and submit it to the designated officer to initiate the exit.

Tax Benefits Under NPS

By investing in NPS, you can claim tax deductions under specific sections of the Income Tax Act and lower the amount of income on which tax is calculated.

Section 80CCD(1): Your Own Contribution

• Applicable To: Salaried & self-employed individuals
• Deduction Limit:
  • Salaried: Up to 10% of Basic + DA
  • Self-employed: Up to 20% of Gross Income
• Cap: Total deduction capped at ₹1.5 lakh

Example:

Ravi's Basic + DA = ₹6,00,000

10% of ₹6,00,000 = ₹60,000

This ₹60,000 is deductible under Section 80CCD(1)

This amount will count toward the ₹1.5 lakh overall limit

Section 80CCD(1B): Additional Deduction for Extra NPS Contribution

• Applicable To: Any individual contributing to NPS
• Deduction Limit: Up to ₹50,000
• Special Note: This deduction is in addition to the ₹1.5 lakh limit under 80CCD(1)

Example:

Ravi has already claimed ₹1.5 lakh under 80CCD(1)

He contributes another ₹50,000 to his NPS

This ₹50,000 qualifies for a separate deduction under Section 80CCD(1B)

Total deduction = ₹2,00,000 (₹1.5 lakh + ₹50,000)

Section 80CCD(2): Employer's Contribution

• Applicable To: Salaried employees whose employer contributes to NPS
• Deduction Limit:
  • 10% of Basic + DA (Old Regime)
  • 14% of Basic + DA (New Regime, for central government employees)
• Over and Above: This deduction is not restricted by the ₹1.5 lakh or ₹50,000 limits

Example:

Ravi's employer contributes ₹1,00,000 (10% of ₹10,00,000 salary)

This full ₹1,00,000 is deductible under Section 80CCD(2)

It is entirely separate from Ravi's personal deductions under 80CCD(1) and 80CCD(1B)

Wrapping Up

Closing your NPS account is simple when you follow the right steps. By keeping your details updated and selecting the right options, you can easily exit, continue, or defer your NPS account. The process ensures that managing your retirement savings is smooth and hassle-free. NPS offers flexibility and convenience, making it an effective choice for retirement planning and securing your financial future.

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