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.
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Any amount can be withdrawn |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.
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.
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 |
|
|
Withdrawal on Early Retirement |
|
|
Withdrawal on Subscriber’s Death |
|
|
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.
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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