As per the new premature exit rules of the Pension Fund Regulatory and Development Authority (PFRDA), you will receive only 20% of the accrued wealth under NPS as a lump sum; the rest of the amount can be used for purchasing an Annuity. The new 80:20 rule concerning premature exit will apply to government, and non-government subscribers enrolled on NPS between 18 and 60 years. Nevertheless, a person from the non-government sector needs to be a subscriber for ten years.
As per PFRDA (Exit and Withdrawal) (Amendment) Regulations, 2021, dated 14th June 2021, the lump sum withdrawal provisions were revised to benefit the NPS subscribers. As per the PFRDA circular dated 21st September 2021, if the corpus is equal to or less than Rs 2.5 lakh, the entire amount will be given as a lump sum to a subscriber.
A normal NPS exit will be permitted at the age of 60 years and above. Hence, the premature exit rules will apply to anyone who intends to exit NPS before attaining 60 years of age. When it is a normal exit, the entire amount can be withdrawn in the form of a lump sum when the corpus is equal to or less than Rs 5 lakh. If the corpus is more than Rs 5 lakh, then a minimum of 40% of the accrued pension wealth of a subscriber needs to be used for purchasing an Annuity.
In case of a subscriber’s demise, the full accrued pension wealth of a subscriber has to be paid to a nominee or a legal heir of a non-government subscriber. In the case of a government subscriber, the lump sum will be paid to the nominee or a legal heir when the corpus is equal to or less than Rs 5 lakh. Nevertheless, when the corpus is more than Rs 5 lakh, then a minimum of 80% of the accrued pension wealth of a subscriber has to be used for purchasing a ‘Default’ Annuity by dependents; the remaining 20% will be paid as a lump sum to a nominee or a legal heir.
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Bhavana is a Senior Content Writer handling the GST vertical. She is committed, professional, and has a flair for writing. When away from work, she enjoys watching movies and playing with her son. One thing she can’t resist is SHOPPING! Her favourite quote is: “Luck is what happens when preparation meets opportunity”.