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How legal heirs can claim NPS money if the investor dies

We also look at how much of the NPS corpus one can withdraw in case of the investor's untimely death

How to claim NPS money if the investor dies?AI-generated image

How will legal heirs get the money back in case of the death of an investor? What are the tax implications on this money? - Anonymous

The National Pension System (NPS) has specific rules regarding the inheritance and transfer of funds to legal heirs in the event of the investor's death. Let's look at them in detail.

1. Subscribers who joined NPS between 18 and 60

For government sector employees:

  • Corpus less than or equal to Rs 5 lakh: The nominee or legal heir receives the entire amount as a lump sum. This amount is exempt from tax.
  • Corpus more than Rs 5 lakh: The nominee or legal heir must use at least 80% of the corpus to purchase a default annuity from an annuity service provider. The annuity income is taxable. Only 20% of the money can be withdrawn as a tax-free lump sum.

For the rest of the citizens

  • The entire corpus is payable in full to the nominee or legal heir. What's more, this money is exempt from tax.

    The nominee may also opt to purchase an annuity with the accumulated corpus. However, when a nominee or legal heir opts to purchase an annuity with the accumulated corpus, the periodic payments received from the annuity are typically considered income. In other words, the annuity money will be added to the beneficiary's annual income and then taxed as per the tax slab.

2. Subscribers who joined NPS after 60

  • The entire corpus is payable to the nominees or legal heirs.

Documents needed for legal heirs to claim NPS funds

If the NPS subscriber declared a nominee

  • The subscriber's death certificate must be submitted to the Point of Presence (PoP) or the NPS Trust.
  • The claimant needs to fill out the appropriate claim form, which can be obtained from the PoP or downloaded from the NPS website.
  • The claimant needs to provide their KYC documents, including identity proof, address proof and any other required documentation.
  • Submit proof of relationship with the deceased subscriber, such as a legal heir certificate, succession certificate, or other relevant documents.
  • The claimant needs to provide bank account details for the transfer of funds.

If the NPS subscriber did not declare a nominee
In this case, the accumulated pension wealth is distributed to the legal heirs. To claim this, the beneficiaries of the deceased subscriber need to obtain a legal heir certificate or a succession certificate from an official authority.

Also read: (Maybe) Another upgrade for NPS

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