How to Close NPS Account: Exit Rules, Tax & Process

This is the standard exit for anyone reaching 60, or superannuation for corporate subscribers:

• Non-government subscribers (All Citizen and Corporate models): up to 80% of the corpus as lump sum, at least 20% into an annuity.
• Government subscribers: unchanged — up to 60% lump sum, at least 40% annuity.
• Corpus-based slabs (both sectors): up to Rs 8 lakh means 100% withdrawal as lump sum, SLW or SUR — no annuity needed. Between Rs 8 and 12 lakh, you can take up to Rs 6 lakh with the balance in Systematic Unit Withdrawal (minimum 6 years) or an annuity. Above Rs 12 lakh, the standard split applies.
• You can also defer: stay invested until 75–85 and delay the lump sum or annuity purchase. The old 15-day advance intimation for continuation has been removed — you continue automatically.

Source: PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, December 2025.

Leaving before the vesting period is costlier by design:

• Up to 20% lump sum; at least 80% must buy an annuity — unchanged by the amendment.
• Corpus of Rs 5 lakh or less: you can take 100% in cash (raised from Rs 2.5 lakh earlier). This is the small-corpus escape hatch for premature exit.
• Vesting period (All Citizen Model): 15 years or age 60, whichever comes first. The separate 5-year lock-in for premature exit was removed.
• NPS-Lite subscribers: the old framework still applies — up to 60% lump sum and 40% annuity, with 100% withdrawal only if the corpus is Rs 2 lakh or less.

Note the asymmetry: the Rs 8 lakh full-withdrawal threshold belongs to the normal exit. For a premature exit, the 100% threshold is Rs 5 lakh.

This is different from exit — the account stays open:

• After 3 years as a subscriber, up to 25% of your own contributions (not employer money, not returns).
• Up to 4 withdrawals before 60, with a 4-year gap; after 60, no count limit but a 3-year gap.
• Allowed purposes (post-Dec 2025): medical treatment or hospitalisation for self, spouse, children or parents (no restricted illness list anymore); a child's higher education or marriage; purchase or construction of a first house (one-time only); settling a financial obligation secured by a lien on the NPS account.
• Skill development and starting a business were removed as permitted purposes in the December 2025 amendment.
• A new related facility: you can pledge your pension account as security for a loan — a regulated lender can mark a lien up to 25% of your own contributions.

Source: PFRDA (Exits and Withdrawals) Amendment Regulations, December 2025.

1. Submit an exit request through your Point of Presence (PoP) or nodal office, or online through the CRA portal if you registered via eNPS.

1. Verify bank details. The CRA runs a penny-drop check on the account you nominate — the name must match your PRAN records exactly.

1. Choose your split. Indicate the lump-sum amount and, if applicable, select the annuity service provider and scheme. If you want a structured payout instead, opt for SLW or SUR where eligible.

1. e-Sign or sign the withdrawal forms (601/301, depending on exit type).

1. Money moves in about 5 working days once processed: the lump sum to your bank account, the annuity premium to the insurer you picked.

If your bank details are wrong, the payout bounces — the CRA now reinvests returned amounts back into your PRAN (from January 2026) while you fix the problem, so update records before applying.

Source: Income Tax Act Sections 10(12A), 10(12B), 80CCD; PFRDA exit regulations.

Closing NPS is straightforward once you know which exit you are in: normal (80:20 or the small-corpus slabs), premature (20:80 or the Rs 5 lakh escape), or death claim (100% to family). Get your bank details and name matches right first — most stalled exits fail there, not at PFRDA. And if you are planning the money, decide the annuity slice deliberately: it is the only part that converts corpus into a monthly cheque for life.

Everything above, compressed into one table you can check before submitting anything:

The cap is a cap, not a target: the CRA's own notes confirm you can annuitise the entire corpus if you want, and the lump-sum side is the only side with a ceiling. Within those bounds the split is your choice at the time of the exit request.

The tax-free line is 60% of the total corpus being drawn down — Rs 12 lakh here. Everything in the lump sum above that line, Rs 4 lakh, is taxed at your slab; at the 20% bracket that is Rs 80,000 to the government. The annuity purchase itself is not taxed, but every pension payment the annuity produces is taxed as income, from year one. First-year cash reality: about Rs 15.2 lakh after tax in the bank, plus a monthly pension whose size depends on the annuity rate your insurer quotes that week.

Run the same Rs 20 lakh through the small-corpus slabs and you will see why they matter: at Rs 8 lakh or below there is no annuity at all, and the whole tax conversation shrinks to the 60% line.

Death claims are the one exit no one plans for, which is exactly why the sequence is worth knowing in advance:

• The nominee or legal heir informs the PoP or CRA and collects the claim forms; the nominee's own KYC must be current.
• The death certificate and identity proofs go in with the claim form.
• The payout is elected: 100% of the corpus as lump sum, or SLW/SUR instalments under the December 2025 amendment.
• Payment follows the nomination registered on the PRAN. An outdated nominee is the classic reason a death claim turns into a legal-heir paperwork trail, so updating the nominee today is the cheapest claim processing you will ever do.

You do not have to decide forever at 60. Continuation keeps the account invested (and contributing) for years beyond 60; deferment lets you delay the lump sum or the annuity purchase without exiting. One asymmetry from the CRA's exit notes: under deferment you cannot contribute, while under continuation you can. And once you are no longer employed, the CRA account maintenance charges that your employer may have been bearing shift to you. Neither option is free of consequence — but both beat a rushed exit because "60 arrived".