While bank accounts are generally easy to access, the situation is different with locked-in investments. Even if funds are available, they cannot be withdrawn immediately, unlike regular FDs. Each investment product has its own rules, and families often struggle with these rules during these times. The law allows for withdrawal of locked-in funds after death, but the simplicity of this process depends entirely on nomination and documentation.
What is a locked-in investment
In India, lock-in generally refers to money that an investor cannot easily withdraw during their lifetime, except under special circumstances. Lock-in investments in India primarily include the NPS (National Pension System), PPF (Public Provident Fund), EPF (Employees’ Provident Fund), Sukanya Samriddhi Yojana, Senior Citizens Savings Scheme (SCSS), and tax-saving mutual funds (ELSS). These schemes are designed to help individuals save for retirement or long-term goals, so they have strict rules during a person’s lifetime.
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What changes after the investor’s death
However, after the investor’s death, the law holds that the money belongs to their nominee or legal heirs. Even if the lock-in period ends, the process remains in place, and the rules set out in each product must be followed. At this point, having a nominee becomes crucial.
How does having a nominee simplify the process
If a nominee is properly registered, the process becomes relatively simple. In EPF, the balance is transferred to the nominee upon submission of the prescribed forms and documents. In NPS, the nominee can withdraw the entire amount even if the subscriber has not reached retirement age. PPF, which typically has a lock-in period of 15 years, can be closed upon the account holder’s death, and the entire amount is transferred to the nominee. Sukanya Samriddhi Yojana and SCSS also have clear rules for payouts in case of death or premature closure.
Where does the process get stuck when there’s no nominee
If an account doesn’t have a nominee, the institution can’t disburse funds directly to the claimant. In such situations, proof of legal heir, a succession certificate, or probate of a will is required. This is where delays begin. Claims for investments like PPF, SCSS, or ELSS can be pending for months due to heirs living in different cities, incomplete documents, and other formalities. A will certainly help, but it alone doesn’t immediately unlock all investments. Clearly listing the account and folio number in the will simplifies the process later.
Tax rules don’t completely disappear
Tax rules don’t completely disappear even after death. Income from schemes like PPF, EPF, and Sukanya Samriddhi is generally tax-free, but tax on NPS and mutual funds depends on the holding period and method of withdrawal. In cases of large amounts, it’s better to seek expert advice rather than redeeming everything without thinking.
A few small steps can be taken today to avoid future problems: register a valid and updated nominee for each account, maintain a simple list of your investments, and let a trusted family member know where these documents are kept. Locked-in investments are meant to protect your savings; they shouldn’t become a burden for your family after you’re gone. Proper preparation can ensure that your hard-earned money reaches the right people at the right time.
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