Nps Withdrawal Rules that you need to know

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The National Pension System (NPS) is designed for long-term retirement planning, providing flexibility for partial and premature withdrawals under specific circumstances. The Pension Fund Regulatory and Development Authority (PFRDA) is the governing authority of NPS, managing legal compliance, investment processes, and the latest withdrawal rules.

At maturity, investors can choose from various withdrawal options, each subject to specific rules. Whether your NPS investment was made online or through a broker, a comprehensive understanding of withdrawal choices enhances effective investment management.

NPS Maturity Withdrawal Rules: Tier I vs. Tier II Accounts

Here’s an overview of the NPS withdrawal rules upon maturity for both Tier I and Tier II accounts:

Factors	NPS Tier I Account	NPS Tier II Account
Age for Withdrawal	At 60 or upon superannuation	Anytime as per investor's requirement
Lump Sum Withdrawal	Up to 60% of the corpus	Any amount can be withdrawn
Annuity Purchase Requirement	40% of the funds must be used to buy annuity plans	No requirement for annuity purchase
Tax on Corpus	Tax-free if the corpus is less than ₹2 Lakhs	Taxable
Tax on Pension Amount	Taxable as per applicable income tax slab	Not applicable
Deferral Option	Can defer withdrawal until 70 and stay invested in NPS	No specific deferral option

Disclaimer: These rules are subject to change at the governing authority’s discretion.

Partial Withdrawal Rules for NPS Tier I and Tier II Accounts

When comparing the two NPS account types, it’s important to know the rules concerning partial withdrawals. This information could be beneficial in times of financial hardship when you require access to additional funds.

Here’s a look at how the withdrawal process works and differs between both NPS accounts:

Factors	NPS Tier I Account	NPS Tier II Account
Conditions for Partial Withdrawal	Education, marriage, home purchase, medical treatment, disability, self-development, or business financing	No withdrawal restrictions
Partial Withdrawal Amount	25% of total funds accumulated	As per voluntary contribution
Number of Partial Withdrawals	Up to 3 times allowed; 5-year interval required between each withdrawal	Unlimited withdrawals
Tax Benefits on Withdrawal	Subject to tax rules; potential tax benefits on specific withdrawals	No tax benefits
Withdrawal Processing Time	Not specified; may vary	Disbursed within 3 days after initiation of withdrawal process

Disclaimer: These rules are subject to change at the governing authority’s discretion.

NPS Withdrawal Rules for Corporate and Government Employees

The withdrawal rules for NPS after maturity vary according to the category you belong to. Here is a brief overview of NPS withdrawals across employee categories:

Factors	Government Employees	Corporate Employees
Withdrawal on Retirement	Option to withdraw 60% NPS funds (lump sum) at 60 years with 40% invested in annuities Entire amount is withdrawable if it’s under ₹5 Lakhs	Mandatory to invest 40% NPS funds in annuity plans with 60% withdrawable (lump sum) Entire amount is withdrawable if it’s under ₹5 Lakhs
Withdrawal on Early Retirement	80% NPS funds to be invested in annuity with 20% withdrawable as lump sum If total amount is under ₹2.5 Lakhs, it can be withdrawn entirely	Permitted after 5 years; 80% to be invested in annuity, 20% paid out as lump sum If total amount is under ₹2.5 Lakhs, it can be withdrawn entirely
Withdrawal on Subscriber’s Death	Under ₹5 Lakhs - Nominee gets the entire amount Over ₹5 Lakhs - Nominee will receive 20% as lump sum with 80% (mandatory) invested in annuity No Nominee - 80% corpus paid to legal heirs or surviving children	Entire corpus is paid to the nominee or legal heir. Investing in annuity plan is optional

Disclaimer: These rules are subject to change at the governing authority’s discretion.

Here’s a hypothetical example of NPS withdrawal after maturity of the scheme. Assuming you have accumulated a corpus of ₹15 Lakhs in a Tier I or Tier II account, you can withdraw up to ₹9 Lakhs, which is 60%. The remaining ₹6 Lakhs, which is 40%, has to be invested in an annuity plan.

NPS Withdrawal Online and Offline

Easily withdraw from NPS online by logging into the CRA NSDL website with your PRAN and password. Initiate the process by completing the withdrawal form.

Alternatively, you could explore the offline mode option. Here, you can fill in the relevant form and submit it to the nearest NPS Point of Presence (PoP). This refers to the service provider through which you must operate your account.

Here are the documents and details you may be required to submit along with the form:

PRAN
PAN
Nominee information
Bank account and IFSC code
Bank name and address

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What do you mean by ‘exit’ in NPS?

Closing your pension account is termed as an exit in NPS.

When can I initiate an NPS withdrawal?

You can initiate the withdrawal process when the scheme matures or upon superannuation. NPS withdrawal is also possible in the event of death, or when you want to opt for premature withdrawal for specific reasons.

What are the conditions of partial NPS withdrawal?

While there are no conditions for partial withdrawals with NPS Tier II accounts, that is not the case with Tier I accounts. In this case, you must keep the account active for at least three years before withdrawing.

You can withdraw funds up to 3 times if the condition for withdrawal is permissible. Lastly, partial withdrawal is capped at 25% of the contributions you have made.

Can I get a loan against my NPS investment?

No, you cannot get a loan against NPS. However, you can make a partial NPS withdrawal as per the prescribed conditions.

How many times can I partially withdraw from NPS?

You can initiate an NPS withdrawal up to 3 times during the subscription period. This amount cannot be more than 25% of your contributions.

What happens to my Tier II account if I opt for an NPS withdrawal of Tier I?

Once you withdraw or close your Tier I account, the Tier II account will be closed automatically.

Can I continue my Tier II account as long as my Tier I account is active?

Yes, you can keep your Tier II account active as long as your Tier I type is open.

What documents are needed for partial NPS withdrawal?

You will need to fill out a partial withdrawal form and submit a self-declaration about the purpose for partial withdrawal. Also, you may need to submit your bank documents.