NPS Exit at 60: Withdrawal Rules, Tax Benefits & Annuity Options

When you turn 60 (or superannuate), you can exit the National Pension System and access your retirement corpus. The rules allow you to withdraw up to 60% as a tax-free lump sum and use the remaining 40% (minimum) to purchase an annuity that provides regular monthly pension. This guide covers the complete exit process, annuity options, and tax treatment.

NPS Exit Rules at Age 60

At maturity (age 60), the NPS exit rules are:

Example: If your NPS corpus at 60 is ₹50,00,000:

• Maximum lump sum: ₹30,00,000 (60%) — tax-free
• Minimum annuity: ₹20,00,000 (40%) — used to buy monthly pension
• You can also choose 50-50, 30-70, or even 0-100 (all for annuity)

What is an Annuity?

An annuity is a financial product that converts your lump sum into a regular monthly/quarterly pension for life. When you exit NPS, you must use at least 40% of your corpus to buy an annuity from a PFRDA-empaneled Annuity Service Provider (ASP).

PFRDA-Empaneled Annuity Providers:

1. Life Insurance Corporation of India (LIC)
2. SBI Life Insurance
3. ICICI Prudential Life Insurance
4. HDFC Life Insurance
5. Star Union Dai-ichi Life Insurance
6. IndiaFirst Life Insurance
7. Max Life Insurance
8. Tata AIA Life Insurance
9. Aditya Birla Sun Life Insurance
10. Bajaj Allianz Life Insurance

Types of Annuity Plans

You must choose one of these annuity options:

How to choose:

• Single with no dependents: Annuity for life (highest pension amount)
• Married: Annuity with 100% or 50% to spouse (ensures spouse gets pension)
• Want nominee protection: Annuity with return of purchase price
• Worried about inflation: Annuity increasing at 3% p.a.

Step-by-Step Online Exit Process

For All Citizens Model (Self-Enrolled) Subscribers:

1. Log in to CRA — Visit cra-nsdl.com and log in with your PRAN
2. Initiate exit request — Go to "Exit/Withdrawal" → "Superannuation/Normal Exit"
3. Choose lump sum percentage — select how much you want as lump sum (up to 60%) and how much for annuity (minimum 40%)
4. Select Annuity Service Provider (ASP) — choose from the empaneled list
5. Choose annuity type — select the annuity variant you prefer
6. Enter bank details — confirm the bank account for lump sum credit
7. Upload documents:
   • PRAN card
   • Identity proof (Aadhaar/PAN)
   • Bank proof (cancelled cheque)
   • Passport-size photograph
8. Authenticate — verify with OTP and e-sign
9. Submit — note down the acknowledgement number
10. Processing — lump sum is credited within 7-10 working days; annuity provider contacts you to start pension

For Government/Corporate Subscribers:

1. Submit exit form to your nodal officer/DDO
2. Nodal officer initiates exit on CRA portal
3. Provide annuity preference and bank details
4. Processing through employer takes 15-30 working days

Deferment Option: Don't Want to Exit at 60?

You can defer your NPS exit:

• Defer lump sum: Up to age 75 — your corpus continues to grow in NPS
• Defer annuity: Up to 3 years from date of exit — you can take lump sum at 60 and buy annuity later
• Continue contributing: You can continue making contributions up to age 75 (since 2021 rule change)
• Mandatory exit at 75: If you haven't exited by 75, the exit happens automatically

Why defer? If markets are down at 60, deferring allows your corpus to potentially recover. Your money continues to be managed by the fund manager.

What if Corpus is Less Than ₹5 Lakh?

If your total NPS corpus at exit is ₹5 lakh or less:

• You can withdraw 100% as lump sum — no annuity purchase required
• The entire amount is tax-free
• This applies to both normal exit at 60 and premature exit

Premature Exit (Before Age 60)

If you exit NPS before 60:

Tax Treatment Summary

Important Tips

1. Compare annuity rates — different providers offer different pension amounts for the same corpus. Compare before choosing
2. Don't rush the decision — you can defer annuity purchase by up to 3 years while you research options
3. Consider partial annuity — take 60% lump sum and invest it yourself if you have financial expertise; use 40% for guaranteed pension
4. Spouse protection matters — choose annuity with spouse benefit if your spouse depends on your income
5. Plan for taxes — while lump sum is tax-free, annuity pension is taxable. Factor this into retirement planning

Frequently Asked Questions

Is the 60% NPS lump sum completely tax-free?

Yes. Under Section 10(12A) of the Income Tax Act, up to 60% of the NPS corpus withdrawn as lump sum at maturity (age 60 or superannuation) is completely tax-free.

What if I don't want any lump sum and want 100% annuity?

You can use 100% of your corpus to buy annuity. The 60-40 is the maximum lump sum and minimum annuity split, not a mandatory ratio.

Can I choose multiple annuity providers?

No. Currently, you must select one Annuity Service Provider for your entire annuity corpus. You cannot split across providers.

What happens if I die before 60?

The entire NPS corpus (100%) is paid to the nominee as a lump sum. This amount is completely tax-free. No annuity purchase is required.

Can I change my annuity provider after starting pension?

No. Once you purchase an annuity, it cannot be transferred to another provider. Choose carefully after comparing rates and options.

What is the minimum pension I will get?

The pension amount depends on your corpus size, chosen annuity type, your age at purchase, and the provider's rates. For example, with ₹20 lakh annuity corpus at age 60, expect roughly ₹8,000-₹12,000 monthly pension (varies by provider and annuity type).

Can I do partial withdrawal after age 60?

No. After 60, the exit/maturity process applies. Partial withdrawal is only available before age 60 for specific reasons.

This guide is for informational purposes only and is not affiliated with PFRDA, NSDL, or any government body. Annuity rates and rules may change — verify on the official PFRDA website and with your chosen annuity provider.