NPS Death Benefits

What is NPS?

The full form of NPS is the National Pension Scheme. This investment plan was introduced for government employees in 2004 and subsequently opened for all Indian residents and Non-Resident Indians (NRIs) on a voluntary basis. The Pension Fund Regulatory Development Authority (PFRDA) regulates and administers this social welfare initiative.

NPS allows you to make regular contributions during your working years, with the option to choose between equity, fixed deposits, and government funds as investment options. The scheme also provides a tax benefit to encourage savings. 

At retirement, you can receive a lump sum amount and a regular pension from the accumulated corpus. Anyone from 18 to 70 years old can join the scheme and build a corpus for a financially stable retired life.

It is imperative to learn about the scheme, especially exit rules, to comprehend the ambit of NPS death benefits.

NPS Death Benefits Claim 

The NPS ensures financial stability for you in retirement and serves as a safeguard for the subscriber's family in case of their demise. If a subscriber passes away before cashing in the scheme, their nominee or legal heir can withdraw the accumulated amount as a lump sum, with no option for an annuity or monthly pension.

1. Unfortunate Death of Subscriber (Before 60 Years or Age of Superannuation)

   • Government Sector:

     • If the corpus on the date of death is equal to or less than Rs.5.00 Lakh, the entire amount is paid as a lump sum to nominees/legal heirs.

     • If the corpus exceeds Rs.5 Lakh, 80% is utilized for Default Annuity for dependent family members (spouse, mother, father), and the remaining 20% is paid as a lump sum to nominees/legal heirs.

     • If no dependent family members are alive, 20% goes as a lump sum to nominees/legal heirs, and the balance of 80% is payable to surviving children or legal heirs.

   • Non-Government Sector:

     • The entire corpus, regardless of the limit, is paid to nominees or legal heirs.

2. Unfortunate Death of Subscriber (Subscribers Joined After 60 Years)

   • Non-Government Sector: The entire corpus of the subscriber is payable to nominees or legal heirs.

   • Limit for Withdrawal of Entire Corpus as Lump Sum: NIL

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Who Can Claim NPS Death Benefits?

1. Nominee Designation:

   • The designated nominee is the primary claimant for NPS death benefits.

   • Subscribers can nominate a family member, friend, or any other person as their nominee.

2. Family Members:

   • Spouses, children, and parents of the deceased NPS account holder are eligible to claim death benefits.

   • The order of preference may vary based on the nominee's relationship with the deceased.

3. Legal Heirs:

   • In the absence of a nominee, legal heirs of the deceased can claim NPS death benefits.

   • Legal documentation is required to establish the heir's rightful claim.

4. No Nomination or Heirs:

   • If there is no nominee or legal heir, the benefits may be transferred as per the deceased's will or applicable inheritance laws. 

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Types of Forms for NPS Death Benefits

Different withdrawal forms cater to distinct employment categories. You can simplify the process of an NPS death claim by choosing the appropriate form based on your job sector.

• Form 101 GD: Claim for a deceased Central or State Government employee 

• Form 303: Claim for a deceased individual of a corporate sector employee

• Form 503: Claim for a deceased Swavalamban sector subscriber

Documents Required for NPS Death Benefits

Once you have chosen the appropriate claim form based on your employment, you need to submit the following essential documents to support your claim:

1. Original PRAN Card:

   • Submit the original PRAN card with the chosen withdrawal form.

   • In case the PRAN card is unavailable, provide a notarized affidavit.

2. Cancelled Cheque or Bank Certificate:

   • Include a cancelled cheque with claimant details (name, account number, IFSC code).

   • For electronic transfers, provide a bank certificate with the necessary details.

3. Death Certificate:

   • Attach the subscriber's death certificate along with the withdrawal form.

4. Succession or Legal Heir Certificate:

   • Provide a valid succession or legal heir certificate as proof of claimant's status.

5. Address and ID Proof:

   Submit a government-approved ID card (passport, driving license, Aadhar card, etc.) as proof of nominee/legal heir. 

Steps to Claim NPS Death Benefits

Follow the steps mentioned below to claim the NPS death benefits:

Step 1: Gather Essential Documents:

• Death certificate of the NPS subscriber

• Nominee's or legal heir's KYC documents (identity and address proof)

• Bank account details of the nominee or legal heir

• Duly filled NPS Death Withdrawal Form

Step 2: Submit Documents to the Point of Presence (PoP):

• Locate the PoP associated with the subscriber's PRAN (Permanent Retirement Account Number).

• Submit the completed Death Withdrawal Form along with the required supporting documents to the designated PoP.

Step 3: Processing and Claim Settlement:

• The PoP will review the submitted documents and initiate the claim processing.

• Upon successful verification, the NPS corpus and any accrued benefits will be disbursed to the eligible claimant.

• The nominee or legal heir will receive a notification regarding the claim settlement.

NPS Death Benefits for Central Government Employees

Central Government employees under NPS can choose between the old pension scheme and the accumulated pension corpus under NPS in the event of their death. This choice must be exercised by the employee, or a default option applies.

1. Default Options: 

   If the employee does not make a choice, the default option for the first 15 years of service is the old pension scheme. After 15 years, the default option becomes a benefit under NPS. This default option is applicable until March 2024.

2. Benefits for In-Service Death:

   • Family pension under CCS (Pension) Rules, 1972 (based on the chosen or default option).

   • Death Gratuity

   • Leave Encashment

   • Benefits from CGEGIS

   • CGHS facilities

3. Consistent Additional Benefits:

   Death gratuity, leave encashment, CGEGIS, and CGHS benefits apply in both scenarios.

Tax Implications of NPS Death Benefits

The tax implications of NPS death benefits depend on the recipient and the type of account (Tier 1 or Tier 2):

1. Nominee/Legal Heir:

   • Tier 1:

     • Up to 60% of the corpus withdrawn as a lump sum is exempt from tax.

     • The remaining 40% and any annuity income are taxed as per the recipient's income slab.

   • Tier 2:

     • The entire amount received is exempt from tax. This includes the corpus, accrued interest, and any returns.

2. Minor Nominee:

   • If the nominee is a minor, the guardian managing the funds is responsible for paying taxes on the minor's behalf.

   • The tax treatment will be the same as for any other recipient.

3. Government Employee:

   • If the deceased was a government employee, the nominee/legal heir may be eligible for additional tax benefits under specific rules.

   • Consulting a financial advisor is recommended for specific guidance.

Grievance Redressal as per Regulation 31 of  PFRDA (Redressal of Subscriber Grievance) Regulations, 2015: 

For grievance redressal under Regulation 31 of PFRDA (Redressal of Subscriber Grievance) Regulations, 2015, refer to the appointed Ombudsman details on the PFRDA website: www.pfrda.org.in. Currently, Shri Narender Kumar Bhola serves as the Ombudsman. Contact information is as follows:

• Name: Shri Narender Kumar Bhola

• Organization: Pension Fund Regulatory and Development Authority

• Address: B-14/A, Chhatrapati Shivaji Bhawan, Qutab Institutional Area, Katwaria Sarai, New Delhi-110016

• Email: ombudsman@pfrda.org.in

• Landline: 011-26517507 (Ext: 188)

In Conclusion

The death benefits of the NPS provide financial security to subscribers and their families by allowing nominees or legal heirs to withdraw the accumulated amount as a lump sum in the event of the subscriber's demise.