Answer By law4u team
The National Pension Scheme (NPS) is a government-sponsored pension scheme that allows individuals to contribute towards their retirement fund during their working years. Typically, the scheme is designed for individuals between the ages of 18 and 60. However, once an individual reaches the age of 60, there are certain provisions and rules regarding the continuation of contributions, withdrawals, and the overall functioning of the NPS account.
Detailed Guidelines on NPS After 60:
Continuation of Contributions After 60:
Contributing Beyond 60: As per the NPS guidelines, the maximum age for contributing to the NPS is 60 years. After reaching the age of 60, regular contributions cannot continue unless the individual opts for voluntary continuation under specific conditions.
Option for Voluntary Contribution After 60:
If a person wants to continue contributing to NPS after the age of 60, they must make an application to the Pension Fund Regulatory and Development Authority (PFRDA). If approved, they can continue contributing till the age of 70, but this requires fulfilling certain conditions like being in good health and being financially stable.
Mandatory Annuity Purchase After 60:
At the age of 60, the individual is required to purchase an annuity with a portion of the accumulated NPS corpus. According to NPS rules, 60% of the accumulated corpus can be withdrawn as a lump sum, and the remaining 40% must be used to purchase an annuity. The annuity is meant to provide regular income post-retirement.
Exit Options at Age 60:
Partial Withdrawal:
At the time of retirement or upon reaching the age of 60, the subscriber can withdraw up to 60% of their accumulated NPS corpus as a lump sum.
Compulsory Purchase of Annuity:
The remaining 40% must be used to purchase an annuity plan from one of the authorized annuity service providers under NPS.
Lump Sum Withdrawal:
If the total NPS corpus is less than ₹2 lakh, the individual may opt to withdraw the entire amount as a lump sum without the need to purchase an annuity.
Opting for Extension of NPS:
NPS Extension After 60:
If the subscriber does not wish to withdraw their funds at the age of 60, they have the option to extend their NPS account beyond the age of 60. In this case, they can choose to keep contributing to their NPS account until the age of 70. The process for extension requires a request to the PFRDA, and contributions will continue to receive tax benefits.
Tax Benefits:
NPS subscribers can continue to enjoy tax benefits until they make their final withdrawal or annuity purchase. Contributions made up to ₹50,000 are eligible for a deduction under Section 80CCD(1B) of the Income Tax Act, in addition to the ₹1.5 lakh deduction available under Section 80C.
Annuity Payment:
Once an annuity is purchased at the time of retirement or after the age of 60, the individual will start receiving regular pension payments as per the annuity plan selected. The pension can be either for a lifetime or for a specific period, depending on the type of annuity chosen.
Withdrawal and Corpus Management:
If the individual decides to exit NPS at the age of 60 and not extend the account, the total corpus is divided into two parts: 60% is available as a lump sum withdrawal and 40% is used to buy an annuity.
No Further Contributions Post 70:
After the age of 70, an individual cannot continue to contribute to the NPS account. Any remaining corpus must be withdrawn or used for the purchase of an annuity, as per the regulations.
Example:
Suppose an individual has contributed to the NPS throughout their career and turns 60. The options available to them are:
- Withdraw 60% of the corpus as a lump sum and use the remaining 40% to purchase an annuity for regular post-retirement income.
- Extend the NPS account for another 10 years until the age of 70, subject to approval by the PFRDA, and continue contributing and receiving tax benefits.
- If the total corpus is less than ₹2 lakh, they may choose to withdraw the entire amount as a lump sum and not purchase an annuity.
