A subscriber can exit NPS due to following reasons:
- Superannuation (or retirement)
- Turning 60 (All Citizens model)
- Premature Exit
How do you exit NPS? Are you aware of the exit process?
PFRDA came out with a circular in November 2015 stating that all withdrawals or exit from NPS shall be made online. However, the process is completely online only for nodal offices and Point of presence. When PFRDA mentioned online, it did not mean “Online for Subscribers” but for the intermediaries.
For subscribers, the process is not completely online. For subscribers, even the online process contains multiple offline steps. You can read the PFRDA circular here.
How to exit NPS?
If you have decided to exit NPS, you can place a physical request or make a request online.
1. Physical Process
If you are a Government subscriber, you can visit nodal office (PAOs and DTAs) and submit physical form. Nodal Office will subsequently create an online request on your behalf.
If you are a non-Government NPS Subscriber (All Citizens Model), you can visit PoP-SP and submit physical form. PoP-SP will create an online request for exit on your behalf.
You can download the forms from CRA website. Along with the form, you will have to submit original PRAN card and a few KYC documents. Such details are provided in the forms.
2. Online Exit Process
You can log in to eNPS portal (CRA website) and create exit request yourself.
All NPS subscribers (Government NPS subscribers and All Citizen Model subscribers) can register on CRA website and can place the request for exit from NPS online.
However, you need to specify Claim ID at the time of placing an exit request. This Claim ID is a major cause of concern. The need for Claim id ensures that the process cannot be entirely online.
Snapshots from CRA website
Once you log in to CRA website, this is what you see.
Since my superannuation or 60th birthday is more than 180 days away, I do not see the option to withdraw due to Superannuation.
Also, notice that the claim id is to be mandatorily entered. Secondly, my present corpus under NPS is way less than Rs 1 lac (rules for Premature withdrawal provided as appendix). Hence, I can even withdraw the entire amount lump sum. No compulsion to purchase annuity.
How to Create Claim id for online exit process?
If you are exiting NPS on superannuation (retirement) or turning 60, CRA will automatically generate and communicate claim id to you six months prior to your retirement or 60th birthday (as the case may be).
However, if you are making a premature exit, you need to request nodal office (Government Subscribers) to create Claim id for you. This request is offline.
In case of All Citizens Model, you need to visit PoP and submit the form.
I am not sure which form to fill. Perhaps, nodal office or PoP can answer.
How will eNPS subscribers create Claim id?
Those who opened NPS account through eNPS do not have a physical PoP.
I checked with NSDL CRA about process of generation of Claim id for eNPS subscribers. At the moment, even NSDL is awaiting clarification from PFRDA. eNPS is a new development. In any case, subscribers under Citizens model cannot exit (prematurely) before 10 years. So, by the time first eNPS subscriber is eligible for exit, PFRDA will come out with necessary directions. I am copying the response from CRA customer care.
Dear Subscriber, we wish to inform you that for your query regarding generation of claim id after completion 10 years in NPS, we are yet to receive the guidelines from PFRDA (the regulator of NPS), once we receive the guidelines from the PFRDA we will inform you accordingly. We hope this clarifies the matter and thank you for being our valuable subscriber.
What details do I need to specify in the online form?
In the online form, you will have to have to specify/confirm following details:
- Lump sum and Annuity percentage
- Annuity details (Frequency, Insurance company, Annuity plan)
- Bank Account Details
- Nominee Details
Am I done after submitting the online exit request?
No. You still need to provide physical copy of duly filled in form (auto-generated by the system) along with KYC proofs (identity an address) and original PRAN card to nodal office or PoP.
Can the nominee apply online in the event of death of subscriber?
No. In the event of death of the NPS subscriber, the nominee must approach the nodal office or PoP to submit requisite form (as mentioned above). There is no online exit process in the event of death of the subscriber.
Demos for Online Exit from NPS
There are useful demos on PFRDA and CRA Websites about how to initiate withdrawal requests online. You can find the demos at this link (on left sidebar). There are different demos for Government and All Citizens model subscribers.
- PFRDA Circular dated November 12, 2015
- Exit Procedure as mentioned on PFRDA website
- Demos for online exit process on CRA website. (Demos at the bottom of left sidebar)
- NPS CRA Withdrawal FAQs
- NPS Subscriber Forms
- Should you invest in NPS?
- NPS Tax Benefits and Tax Treatment at Maturity
- NPS Revised Exit and Withdrawal Rules
Additional Info: Issues/Limitation with Premature Exit from NPS
- You need to utilize at least 80% of the accumulated corpus to purchase an annuity plan.
- Annuity rate is inversely linked to age of the purchaser. If you are young, you will get a lower rate. Hence, by purchasing annuity plan at a young age, you will have to settle for a lower annuity rate.
- You can draw only up to 20% lump sum. Even though the entire 20% of the lump sum withdrawal is exempt from income tax, the annuity income is taxed at your marginal income tax rate.
- If the accumulated corpus is less than Rs 1 lac (in case of premature exit), it is not mandatory to purchase annuity. You can withdraw the entire amount lump sum. However, only 40% of the accumulated corpus is exempt from tax.
- Subscribers under All Citizens model cannot exit NPS making subscriptions for 10 years. So, if you haven’t made contributions for at least 10 years, you have to continue. There is no option.
NPS is meant to accumulate retirement savings. Premature exits should be avoided unless in the event of emergency.
Point to Note: In the event of exit from NPS on turning 60 or attaining superannuation, it is not mandatory to purchase annuity if the accumulated corpus is less than Rs 2 lacs.