IFSCCodeof.in

NPS premature exit rules

Subscribers who joined NPS between the age group of 18 and 60 can make a lump sum withdrawal before reaching the age of 60 or superannuation of their corpus is equal to or less than Rs 2.5 lakh. In case the account corpus or investment is equal to or less than 2.5 lakh for government sector subscribers, a lump sum settlement on premature exit will be applicable.

If somehow the corpus is more than 2.5 lakh, then a minimum of 80% of the accumulated pension amount should be used to purchase an annuity and the remaining 20% is handed to the subscriber as a lump sum. In case the investment amount is equal to or less than 2.5 lakh, a lump sum payment is made to non-government sector subscribers.

But if the corpus is higher than the said limit, then a minimum of 80% of the subscriber’s accumulated pension amount should be used to purchase an annuity and the remaining 20% is provided in a lump sum. It is important to remember that in order to make a premature exit, private sector employees must have been active subscribers for ten years.

NPS regular exit rules

Both government sector or private sector subscribers if their corpus is equal to or less than Rs 5 lakhs can also undertake a normal exit from NPS at 60 years of age or beyond or at the time of superannuation. For government employees, if their corpus is more than the said, then a limit of a minimum of 40% of their pension wealth should be used to purchase an annuity and the remaining 60% of the balance can be withdrawn as a lump sum at the time of exit. In the case of private-sector employees with a corpus of more than 5 lakhs, at least 40% of their cumulative pension corpus must be used to purchase an annuity and the remaining 60% can be withdrawn as a lump sum.

In case of unfortunate death of the subscriber joined NPS between 18-60 years of age

If the corpus is less than or equivalent to Rs 5 lakhs, a lump sum amount is provided to nominees/legal heirs upon the tragic death of a government sector employee. However if the corpus is more than the said amount then a minimum of 80% of the subscriber’s accumulated pension amount must be used for the purchase of a Default Annuity for dependents, with the remaining 20% given as a lump sum to the nominee/legal successor.

If no dependent family members, such as the spouse, mother, or father, are alive, the nominee/legal heir will get a lump sum amount of 20% and the remaining 80 percent of the corpus is handed to the demised government employee’s surviving children or legal heirs. The whole accumulated pension income of a private sector employee is payable to the nominee or legal heirs in case of his or her unfortunate death.

NPS withdrawal rules who joined NPS beyond 60 years of age

According to the guidelines set by PFRDA, a premature exit is regarded as an exit made before 3 years, and a normal exit is regarded as an exit or withdrawal made beyond 3 years. The lump-sum threshold for premature exit is 2.5 lacs, while the normal exit limit is 5 lacs without purchasing an annuity. In the event of the subscribers’ untimely death, the full corpus will be handed to the nominee/legal heirs.

If the corpus is equal to or below 2.5 lakhs, private sector employees who joined NPS between the ages 60 and 70 can make a premature exit before the end of the three-year period; if the corpus is higher than 2.5 lakhs then a minimum of 80% of the accumulated pension income must be used to purchase an annuity providing a monthly pension to the subscriber and the remaining 20% is paid in one single amount.

In case the corpus is equal to or less than 5 lakhs, a lump sum withdrawal is permitted if the normal exit is conducted before the conclusion of 3 years. If the corpus is higher than 5 lakhs, at least 40% of the subscriber’s accumulated pension amount must be used to purchase an annuity and the remaining 60% is paid to the subscriber in a lump sum.

In the event of the untimely death of a private sector employee, the subscriber’s entire accumulated pension amount is handed to the nominee or legal heirs.

Government-backed schemes might give you less returns compared to equity or mutual funds, but they are assured and secured income options. The National Savings Certificates (NSC), offered by the Post Office, backed by the union government is one of those savings tools that will give an assured income after 5 years.

Interest Rates

The 5 Years National Savings Certificate (VIII Issue) is an investment option with fixed income, that offers an interest rate of 6.8%, compounded annually but payable at maturity. That rate is quite higher than some other assured income options. Hence, if you invest Rs. 1000 initially, that will offer you Rs. 1389.49, after 5 years. This is the lock-in period for the NSC scheme.

NSC Calculator

To count the interest amount under the NSC scheme, you must calculate it considering the interest rate and basic amount. The interest amount Interest calculation for one year will be, Interest amount = (Basic Amount * Interest Rate)/ 100.
So, if you invest Rs. 1000 as a basic amount, then your interest amount for the NSC scheme will be 68. so, your total return after one year will be 1068. But in the case of NSC, the interest is calculated at a compound rate, for 5 years. So, in case your basic investment amount is Rs. 1000, the calculation will be as mentioned below.

Principal amount * (1+ interest rate/number of time interest is compounded per unit) ^ number of years = Total return amount

So, the NSC return calculation should be like this: 1000 * (1 + 6.8/100 / 1) ^ 5 = 1389.49

Hence, after 5 years, your returns should be Rs. 1389.49, with a principal amount or basic amount of investment of Rs. 1000, according to the NSC calculator. Using this calculator you can calculate the NSC return, applying your particular basic investment amount.

Investment amount and tax

The minimum investment amount for the NSC is Rs. 1000 and in multiples of Rs. 100. There is no maximum limit of the investment. Your deposits will qualify for deduction under section 80C of the Income Tax Act.

Premature closure

NSC can only be prematurely closed before 5 years in case the single account holder dies, or any or all the account holders in a joint account dies.

To earn lucrative interest after a fixed timeline, you can also check the Post Office PPF scheme to get an assured income.