Can I close NPS account?

Yes, you can exit or close your National Pension System (NPS) account. The NPS offers flexibility for subscribers to exit the system, whether at superannuation, prematurely, or under specific conditions, allowing you to manage your retirement savings according to your needs.

Understanding NPS Exit Options

The ability to exit your NPS account provides control over your retirement corpus. While the system encourages long-term savings, it also offers provisions for withdrawal when required. Exiting NPS involves converting a portion of your accumulated corpus into an annuity (a regular pension) and potentially receiving the remaining amount as a lump sum.

Here's a breakdown of common exit scenarios:

• Normal Exit (at Superannuation/Age 60): Upon reaching the age of 60, or the age of superannuation (up to 75 years), you must utilize at least 40% of your accumulated corpus to purchase an annuity. The remaining 60% can be withdrawn as a lump sum, which is tax-exempt.
• Early Exit (Before Age 60): If you wish to exit NPS before reaching 60 years of age, you must have completed a minimum of three years in the system. In this scenario, at least 80% of your accumulated corpus must be used to purchase an annuity, and the remaining 20% can be withdrawn as a lump sum.
• Partial Withdrawal: After contributing for at least three years, you are allowed to make partial withdrawals, up to 25% of your own contributions, for specific purposes such as children's education or marriage, purchasing a house, or treatment of critical illnesses. This option is available a maximum of three times during the entire subscription period, with a gap of five years between each withdrawal.
• Voluntary Exit/Deferment: If you do not wish to continue your NPS account or prefer to defer your withdrawal beyond the age of 60 (up to 75 years), you can exit from NPS anytime, subject to the conditions of early or normal exit.

How to Initiate Your NPS Exit

The process for exiting your NPS account is streamlined through the Central Recordkeeping Agency (CRA) system. Here are the general steps:

1. Log in to the CRA System: Access the official CRA system, typically through the NSDL CRA portal (www.cra-nsdl.com). You will need your User ID (which is your Permanent Retirement Account Number - PRAN) and Password.
2. Navigate to the Exit/Withdrawal Section: Once logged in, locate the section related to 'Exit,' 'Withdrawal,' or 'Annuity' requests.
3. Enter Necessary Details: Fill in all the required information accurately. This typically includes personal details, bank account information for lump sum withdrawal, and contact information.
4. Choose an Annuity Service Provider (ASP): An essential step is selecting an Annuity Service Provider (ASP). These are IRDAI-regulated life insurance companies that will provide you with a regular pension based on the annuity scheme you choose. You will need to review the options and select an ASP that best suits your needs.
5. Select an Annuity Scheme: After choosing an ASP, you will need to select an Annuity Scheme. There are various types of annuities, such as annuity for life, annuity with return of purchase price, annuity with a guaranteed period, etc. Understand the implications of each scheme before making your selection.
6. Submit Required Documents: Depending on your chosen ASP and scheme, you may need to submit supporting documents such as KYC (Know Your Customer) documents, bank account proof, withdrawal forms, and cancelled cheques. These are typically submitted to your Point of Presence (POP) or directly to the ASP.
7. Verification and Processing: Your request will then be verified by the CRA and the chosen ASP. Once approved, the annuity payments will commence as per the chosen scheme, and any lump sum amount will be credited to your bank account.

Important Considerations for Exiting NPS

Before initiating your NPS exit, consider the following:

• Tax Implications: While the 60% lump sum withdrawal at normal exit (age 60) is tax-exempt, the annuity income you receive from the ASP is considered taxable income as per your income tax slab. Early withdrawals also have specific tax treatments, so it's advisable to consult a tax advisor.
• Annuity Choice: The choice of ASP and annuity scheme is crucial as it determines your regular pension income for life. Compare various options based on the pension amount, death benefits, and other features.
• Documentation: Ensure all your KYC details are updated in your NPS account to avoid delays during the withdrawal process.
• Financial Planning: Consider your financial needs post-NPS exit. Will the annuity income be sufficient? How will the lump sum be utilized? It's wise to have a comprehensive financial plan.

Exiting your NPS account is a significant financial decision. Understanding the rules, procedures, and implications will help you make an informed choice that aligns with your long-term financial goals.