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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Any amount can be withdrawn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.

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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


On Bajaj Markets, you can explore different investment and tax-saving options, including NPS. Browse the various benefits and features NPS accounts offer and start your savings journey today.

FAQs on NPS Withdrawal Rules

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.

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