NPS Corporate model: exit maths at retirement and the option to stay invested until age 75

An employee inside the NPS Corporate Sector Model reaches superannuation with one decision already taken for them by regulation: a minimum of 40% of the accumulated pension wealth must buy a monthly annuity, and the remaining 60% is paid out as a lump sum. Both numbers are set out in the Pension Fund Regulatory and Development Authority's exit FAQ for the corporate model at pfrda.org.in, and they are where every other choice a retiring subscriber makes begins.

The second decision is the one most employees do not know they have. A subscriber who does nothing at 60 is not thrown out: PFRDA's answer is that the subscriber continues to remain subscribed up to the age of 75 years, with the Permanent Retirement Account shifted from the employer to the all citizens model. That is worth up to fifteen further years of compounding to someone retiring at 60 in 2026.

This piece stays inside the corporate model — the customised version of the National Pension System introduced in December 2011 for organised entities, per PFRDA's NPS for Corporates page. Registration runs through the employer, the employer may pick the Point of Presence and the Pension Fund, and the exit application goes to that Point of Presence through the corporate.

The Scheme Explained

The corporate model sits on a Tier-I account whose withdrawals and exits are governed by the PFRDA (Exits and Withdrawals Under the NPS) Regulations, 2015 and the amendments under it. The optional Tier-II account carries no lock-in, no tax deduction and zero annual maintenance charge, and is closed automatically the moment Tier-I is closed, even if nobody applies for that closure.

PFRDA defines an exit as the closure of the individual pension account, and lists five situations in which it happens: on attaining 60 or superannuation; before 60 or superannuation; any time after 60 and up to 75; on physical incapacitation or bodily disability before 60; and on death or the subscriber being declared missing. The benefits differ sharply between the first two.

At superannuation the split is 40/60. A minimum of 40% of the accumulated pension wealth buys the annuity, the subscriber may voluntarily annuitise more, and the balance of 60% is paid as a lump sum. There is one full-withdrawal window: where the accumulated pension wealth is equal to or less than Rs 5 lakh, the entire amount can be withdrawn without annuitisation. PFRDA is blunt about the consequence — once the whole corpus is withdrawn, the right to receive any pension or other amount under the NPS is extinguished.

Two corporate-only provisions deserve a line. A disability exit needs a certificate from a government surgeon or doctor stating that the subscriber cannot perform regular duties and that disability exceeds 75%; benefits then mirror the exit at 60. And where service rules so provide, the head of the organisation may withhold the pension wealth built from employer co-contributions to recover an established pecuniary loss, a right that must be exercised before the date of superannuation by notice to the NPS Trust, with payout in no case beyond 90 days of the final order.

On death, the entire accumulated pension wealth goes to the nominees or legal heirs, who may still buy any annuity on offer. Where the subscriber is declared missing, 20% of the corpus is released as interim relief and the remaining 80% follows the determination of presumed death under the Indian Evidence Act, 1872.

Premature Exit Before 60: The 80/20 Split

A voluntary exit before 60 or superannuation inverts the arithmetic: a minimum of 80% must be annuitised and only 20% is paid as a lump sum. The full-withdrawal window shrinks with it, to a corpus of Rs 2.5 lakh or less against Rs 5 lakh at superannuation.

PFRDA answers one practical wrinkle directly. If the corpus exceeds Rs 2.5 lakh but the subscriber is younger than the minimum age at which any empanelled annuity service provider will sell an annuity, the subscriber stays in the NPS until that age and buys the annuity then; the account does not lapse.

For an employee weighing a job move at 45 or 50, that 80/20 rule is the number to hold on to: on a Rs 40 lakh corpus a premature exit locks Rs 32 lakh into an annuity contract and releases Rs 8 lakh, where waiting until superannuation reverses the proportions. Model both with the retirement drawdown calculator.

Partial Withdrawals While You Are Still In

Partial withdrawal is the release valve that keeps a Tier-I account from being raided through a premature exit. PFRDA caps it at 25% of the subscriber's own contributions, calculated without any appreciation on that amount, as on the date of the application. Employer contributions are outside the base, which matters in the corporate model where the employer may be putting in 14% of basic plus dearness allowance.

The frequency limits are strict: a maximum of three partial withdrawals in the entire tenure, the first only after completing three years from the date of joining. There is no minimum gap between applications, but the second draws on 25% of the own contributions made between the two withdrawals, not on the full history again.

The permitted purposes are a closed list of seven: higher education of children, including a legally adopted child; their marriage; the purchase or construction of a house or flat in the subscriber's own name or jointly with a legally wedded spouse, barred where a house other than ancestral property is already owned; treatment of specified illnesses, a list running from cancer and end-stage renal failure to stroke, coma, total blindness and paralysis; medical expenses arising from disability; skill development or re-skilling; and setting up the subscriber's own venture. Where a specified illness prevents the subscriber from applying, any family member may submit the request.

Tax on Withdrawal

The contribution side is the better-documented half. Per PFRDA's corporate page, employee contributions qualify under Section 80CCD(1) up to 10% of salary (basic plus dearness allowance), inside the Rs 1.5 lakh ceiling of Section 80CCE, while employer contributions are deductible under Section 80CCD(2) up to 10% of salary under the old tax regime and 14% under the new. The Income Tax Department's return applicability guide states the same 14% limit for all categories of employers under the new regime, and shows the old-regime split as 10% for a public sector undertaking or other employer and 14% for the central or state government.

One deduction does not travel across regimes, and it is the one employees ask about most. The new regime does not allow the additional Rs 50,000 deduction under Section 80CCD(1B); that deduction is available only in the old regime, alongside the Rs 1.5 lakh combined limit for Sections 80C, 80CCC and 80CCD(1). The employer's side is cleaner: its NPS contribution of up to 14% of salary is treated as a business expense deductible under Section 36(1)(iv)(a) of the Income-tax Act, 1961.

At exit the taxable event moves to the annuity. The annuity bought with at least 40% of the corpus is received as pension, and pension is assessed under the head Salary / Pension in the return, as the Income Tax Department's page cited above shows; it is taxed at the subscriber's slab in the year of receipt. The exemptions on the other two legs sit in the Income-tax Act, 1961 itself — Section 10(12A) for the amount received on closure and Section 10(12B) for a partial withdrawal — and the current wording of both should be checked on incometax.gov.in before a return is filed.

The slabs that will apply to that pension, for FY 2025-26 under the new regime, are these.

Two further numbers shape the bill: the standard deduction is Rs 75,000 in the new regime against Rs 50,000 in the old, and the Section 87A rebate in the new regime runs up to Rs 60,000 where taxable income does not exceed Rs 12 lakh, with 4% health and education cess on the tax after rebate. Keep the gratuity cheque separate in the planning: its exemption under Section 10(10) is capped at Rs 20 lakh, raised from Rs 10 lakh by the Finance Act, 2018, and our gratuity calculator handles that leg.

Worked Drawdown

Take a subscriber who joined the corporate model on 1 April 2016 and contributed Rs 1.5 lakh of her own money each year. By 1 April 2026 her own contributions total Rs 15 lakh, so a partial withdrawal is capped at 25% of that, or Rs 3.75 lakh, and the first was available from 1 April 2019. If she takes it and contributes for three more years at the same rate, the Rs 4.5 lakh added between the two applications sets the second cap at Rs 1.125 lakh, leaving one of the three withdrawals for the rest of her tenure.

At exit the corpus splits by the table below. The two cliffs are what matter: Rs 5 lakh or less at a superannuation exit, Rs 2.5 lakh or less at a premature one. A rupee above either threshold changes the outcome.

What the annuity then pays is a contract term, not a regulated rate; it varies by annuity service provider and variant, so Oquilia does not quote one. The tax arithmetic can still be run against any payout. Suppose the annuity delivers Rs 20,000 a month, or Rs 2.4 lakh a year, with no other income: after the Rs 75,000 standard deduction the taxable figure is Rs 1.65 lakh, below the Rs 4 lakh nil slab, and the tax is nil.

Raise the payout to Rs 60,000 a month, or Rs 7.2 lakh a year: taxable income is Rs 6.45 lakh, tax before rebate is 5% of Rs 2.45 lakh, or Rs 12,250, and because Rs 6.45 lakh sits inside the Rs 12 lakh threshold the Section 87A rebate of up to Rs 60,000 wipes it out.

At Rs 1.5 lakh a month, or Rs 18 lakh a year, taxable income of Rs 17.25 lakh produces Rs 20,000 in the 5% band, Rs 40,000 in the 10% band, Rs 60,000 in the 15% band and Rs 25,000 on the Rs 1.25 lakh falling in the 20% band — Rs 1,45,000 in all, plus 4% cess of Rs 5,800, for Rs 1,50,800. Compare shapes with the annuity versus SWP calculator and size the corpus with the NPS calculator.

For context on the rest of a corporate retirement stack, EPFO has retained 8.25% for FY 2025-26 and the Public Provident Fund pays 7.1% for the July to September 2026 quarter. The NPS corpus carries no such declared rate, which is why the exit rules rather than a headline number decide how much of it a retiree sees as cash.

Continuation and Deferment to Age 75

A subscriber who does not exit at 60 or superannuation continues in the NPS up to 75, the account moving from the employer to the all citizens model. Exit remains available at any point during that continuation on a request to the Point of Presence or the NPS Trust, and on death during it the entire accumulated pension wealth is paid to the nominees or legal heirs.

Deferment is the other, separate option. The lump sum and the purchase of the annuity can each be deferred up to 75, and both together provided the subscriber bears the maintenance charges of the Permanent Retirement Account, including those payable to the Central Recordkeeping Agency, the Pension Fund and the Trustee Bank. The request must be in writing, submitted 15 days before attaining 60 or superannuation, which is the deadline most people miss.

The trap is that the two are alternatives. PFRDA is explicit: on exercising the option of continuation after 60 or superannuation, the options of deferment, lump sum and annuity alike, are not available. Within a deferment period the subscriber may buy the annuity at any time and may exit at any point. Our glossary explains superannuation and corpus, and our earlier piece on the NPS exit at 60 covers how the same 40/60 treatment reads outside the corporate model.

FAQ

Does the NPS Corporate model force me to buy an annuity at retirement?

In most cases, yes. At 60 or superannuation a minimum of 40% of the accumulated pension wealth must be annuitised and the remaining 60% comes as a lump sum. The exception is a corpus of Rs 5 lakh or less, which may be withdrawn in full; doing so extinguishes any right to a pension under the NPS.

What changes if I leave before 60 and exit the NPS?

The split inverts to a minimum of 80% annuity and a 20% lump sum, and the full-withdrawal window falls to Rs 2.5 lakh or less. If the corpus is above Rs 2.5 lakh but you are below the minimum age at which an empanelled annuity service provider will sell you an annuity, you stay in the NPS until you reach that age.

How many times can I withdraw partially, and for what?

Up to 25% of your own contributions, excluding appreciation, a maximum of three times in the entire tenure, with the first available only after three years from joining. The permitted purposes are children's higher education or marriage, buying or building a house, specified illnesses, disability expenses, skill development, and setting up your own venture.

What happens to my account if I do not exit at 60?

You remain subscribed up to the age of 75 and the Permanent Retirement Account shifts from the employer to the all citizens model. You can exit at any point by applying to your Point of Presence or the NPS Trust, and on death during continuation the entire corpus goes to your nominees or legal heirs.

Can I defer both the lump sum and the annuity purchase?

Yes, each can be deferred up to age 75, and both together if you bear the Permanent Retirement Account maintenance charges, including those of the Central Recordkeeping Agency, Pension Fund and Trustee Bank. The written request must reach an intermediary or the NPS Trust 15 days before you attain 60 or superannuation, and deferment is not available if you have opted for continuation.

Is my employer's NPS contribution still deductible under the new regime?

Yes. Section 80CCD(2) allows the employer contribution up to 14% of salary under the new regime and 10% for a public sector undertaking or other employer under the old regime. The additional Rs 50,000 under Section 80CCD(1B) is old-regime only.

What happens to my Tier-II account when I exit Tier-I?

It is closed simultaneously and automatically, even if you have not applied for it, and the balance is paid to you or your nominees. Tier-II carries no tax deduction on contributions and no annual maintenance charge while it is open.