NPS Withdrawal 2025: Process, Rules, Limits & More

The National Pension System (NPS) is designed to provide financial security to citizens after retirement by ensuring a steady monthly pension. However, in certain situations, individuals may need to withdraw funds for emergencies. To cater to such needs, NPS offers multiple withdrawal options. During the COVID-19 pandemic, the Indian government relaxed withdrawal rules to help subscribers facing financial difficulties.

NPS Withdrawal Rules & Exit Options

NPS allows withdrawals under different circumstances:

• Post-Maturity Withdrawals: After retirement

• Premature Withdrawals: Before retirement

• Partial Withdrawals: Under specific conditions

These rules apply mainly to Tier-I NPS accounts. Tier-II accounts have no withdrawal restrictions but do not offer tax benefits under Section 80C of the Income Tax Act.

General NPS Withdrawal Rules

• Upon retirement (at 60 years or later): Subscribers can withdraw up to 60% of their accumulated corpus as a lump sum, while the remaining 40% must be used to buy an annuity for a regular pension.

• Upon early retirement (before 60 years): Only 20% can be withdrawn as a lump sum, and 80% must be used to purchase an annuity.

• In case of the subscriber’s death, the entire accumulated pension wealth is transferred to the nominee or legal heir.

NPS Withdrawal Rules for Corporate Employees

Upon Retirement

• If the total corpus is Rs. 5 lakh or less, the entire amount can be withdrawn as a lump sum.

• If the corpus is above Rs. 5 lakh, 40% must be used for an annuity, and the remaining 60% can be withdrawn as a lump sum.

• In case of death after retirement, nominees receive the entire corpus as a lump sum but can opt to invest it in an annuity.

Upon Early Retirement

• If the corpus is Rs. 2.5 lakh or less, the full amount can be withdrawn.

• If it exceeds Rs. 2.5 lakh, 80% must be used to buy an annuity, and 20% can be withdrawn as a lump sum.

In Case of Death

• The entire corpus (100%) is given to the nominee or legal heir.

• No annuity purchase is required, ensuring immediate financial support for the family.

NPS Withdrawal Rules for Government Employees

Upon Retirement

• If the corpus is Rs. 5 lakh or less, the full amount can be withdrawn.

• If it exceeds Rs. 5 lakh, 40% must go into an annuity, while 60% can be withdrawn as a lump sum.

• If the corpus is between Rs. 2.5 lakh and Rs. 5 lakh, 80% must be used for an annuity, with 20% available for withdrawal.

Upon Early Retirement

• If the corpus is Rs. 2.5 lakh or less, the full amount can be withdrawn.

• If it exceeds Rs. 2.5 lakh, 80% must be used for an annuity, while 20% can be withdrawn as a lump sum.

• Government employees can continue with NPS even after switching to the private sector through Inter-Sector Shifting (ISS).

In Case of Death

• If the corpus is Rs. 5 lakh or less, nominees can withdraw the full amount.

• If it exceeds Rs. 5 lakh, 80% must go into an annuity, while 20% can be withdrawn.

New NPS Withdrawal Rules 2023

1. Self-declaration for withdrawals removed: Government subscribers must now submit proper documents.

2. Mandatory document uploads: Required documents include withdrawal forms, identity proof, address proof, bank account proof, and PRAN card copy.

3. Instant bank verification: A Rs. 1 deposit is made to verify bank accounts before withdrawal.

4. Systematic Lump Sum Withdrawal (SLW): Fixed withdrawals can be made at regular intervals (monthly, quarterly, half-yearly, or annually) up to 60% of the corpus, with the rest used for annuity purchase.

5. Flexible withdrawals between ages 60-75: Subscribers can withdraw up to 60% of their corpus in this period.

Premature Withdrawal Rules

• Allowed only after 3 years from the account opening date.

• Only 20% of the corpus can be withdrawn; the rest 80% must be used for an annuity.

• If the corpus is Rs. 1 lakh or less, full withdrawal is allowed if the account is at least 10 years old.

Partial Withdrawals from Tier-I Accounts

Partial withdrawals are allowed three times before retirement, with up to 25% of the subscriber’s contribution. Eligible reasons include:

• Higher education of children

• Marriage of children

• Purchase/construction of a home

• Skill development courses

• Starting a business

• Treatment of critical illnesses (cancer, kidney failure, etc.)

• Expenses due to disability or incapacitation

• COVID-19 treatment (added in 2020 under critical illnesses)

NPS Withdrawal After Maturity

• After 60 years, subscribers can withdraw up to 60% of the corpus tax-free.

• The remaining 40% must be used for an annuity to provide a pension.

• The monthly pension is taxable as per the individual’s income tax slab.

• If the corpus is Rs. 2 lakh or less, full withdrawal is allowed at 60 years.

NPS Withdrawal in Case of Subscriber’s Death

• The entire accumulated corpus is transferred to the nominee(s)/legal heir.

• Required documents include:

  • PRAN card

  • Photo ID and address proof

  • Advanced stamped receipt signed by the claimant

  • Bank proof (cancelled cheque/bank certificate)

  • Original death certificate

  • If the nominee is a minor, the guardian must submit the withdrawal form along with the minor’s birth proof.

Conclusion

NPS withdrawals can be done online or offline:

• Online withdrawals: Initiated via the NPS website using PRAN ID and password.

• Offline withdrawals: Require filling out specific withdrawal forms depending on the type of withdrawal.

FAQs

1. Where can I find NPS withdrawal forms?

   • Available on the NSDL CRA website and at Points of Presence (PoP).

2. What are the different types of withdrawal forms?

   • Forms for superannuation, premature exit, and partial withdrawal.

3. Can I withdraw from my NPS account online?

   • Yes, through the NSDL CRA website.

4. Are partial withdrawals from Tier-I accounts taxable?

   • Up to 25% of the subscriber’s contributions can be withdrawn tax-free.

This guide simplifies the NPS withdrawal process while ensuring you understand all the important rules and procedures.