NPS Vatsalya Exit Rules — What Happens at 18?

When the minor subscriber turns 18, the NPS Vatsalya account reaches a critical milestone. The subscriber has three options: continue, shift to regular NPS, or exit. This guide explains all exit options in detail.

Exit options at age 18

Option 1: Continue in NPS Vatsalya till age 21

• The account continues under the same terms
• Fresh KYC is mandatory within 3 months of turning 18
• The subscriber can make 2 additional partial withdrawals between 18-21
• At age 21, the account must be shifted or exited

Option 2: Shift to regular NPS (All Citizen Model)

• The entire corpus is transferred to a regular NPS account
• Fresh KYC is mandatory
• The subscriber then follows regular NPS rules (lock-in till 60)
• This is the recommended option for long-term retirement savings

Option 3: Exit the scheme

• If corpus < Rs 8 lakh: Full withdrawal allowed
• If corpus >= Rs 8 lakh: Up to 80% as lump sum + at least 20% for annuity

What happens if no option is chosen by age 21?

If the subscriber does not choose any option by age 21, the account automatically shifts to NPS under a higher-equity scheme under the Multiple Schemes Framework (MSF), with the same Pension Fund Manager. Withdrawals then follow regular NPS rules.

Exit calculation examples

Example 1: Corpus < Rs 8 lakh (full withdrawal)

• Corpus at 18: Rs 5,00,000
• Full withdrawal: Rs 5,00,000 (lump sum)
• Tax: 60% tax-exempt, 40% taxable (if not reinvested in NPS)
• Net: Rs 3,00,000 tax-free + Rs 2,00,000 taxable

Example 2: Corpus >= Rs 8 lakh (80% lump sum + 20% annuity)

• Corpus at 18: Rs 10,00,000
• Lump sum (80%): Rs 8,00,000
• Annuity (20%): Rs 2,00,000
• Monthly pension from annuity: ~Rs 1,000-1,500
• Tax on lump sum: 60% tax-exempt, 40% taxable

KYC requirements at age 18

Fresh KYC is mandatory at age 18, within 3 months of attaining majority. Required documents:

• Aadhaar card
• PAN card
• Address proof
• Bank account details
• Nominee details

After KYC, the subscriber can operate the account independently.

Tax implications at exit

Lump sum withdrawal

• Up to 60% of corpus: tax-exempt
• 40% of corpus: taxable (if not reinvested in NPS or annuity)

Annuity

• The annuity portion (20% if corpus >= Rs 8L) is tax-free at withdrawal
• Annuity income is taxable in the year of receipt (added to your income)

Death of subscriber before 18

If the subscriber (minor) dies before 18:

• The entire corpus is transferred to the guardian/nominee/legal heir
• Option to transfer the proceeds to the NPS account of the guardian/nominee/legal heir
• No tax on the amount received by the parent/guardian/nominee

Disclaimer

Exit rules are based on PFRDA NPS Vatsalya Scheme Guidelines 2025. Verify with PFRDA before making any exit decisions.

At age 18: Three options
1. Continue till 21
2. Shift to regular NPS
3. Exit (if corpus >= Rs 8L: 80% lump sum + 20% annuity; if < Rs 8L: full withdrawal)
If no choice by 21: auto-shift to NPS (higher-equity MSF)