NPS Withdrawal Rules - How to Withdraw from NPS?

Written by : Knowledge Centre Team

2022-10-07

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Withdrawal from NPS can be made upon attaining the age of 60 years-the widely prescribed age for retirement. You may also make partial withdrawals from the account for purposes other than retirement. The withdrawal can be made after the completion of three financial years. You may withdraw up to 25% of the corpus in the NPS account.

How to Withdraw from NPS?

To withdraw from NPS, you must have reached the age of 60. You may choose to receive a lump sum payment or an annuity depending on the corpus size. Specific details on withdrawals at or before 60, are listed below:

You may withdraw 100% of the corpus if it is less than or equal to Rs. 5 lakhs when you turn 60
If the corpus is greater than Rs. 5 lakhs, you may withdraw up to 60% when you turn 60.
For partial withdrawals before the age of 60 years, the following pre-conditions apply:

    a. Your NPS account must have been active for at least 3 years
    b. The withdrawal amount should not exceed 25% of your contributions
    c. A maximum of 3 withdrawals permitted during the tenure
      d. Withdrawal is permitted for extraordinary reasons such as:
       i. Children’s higher education
       ii. Children’s marriage
       iii. Purchase/construction of a house
       iv. Treatment of specified critical illnesses

Partial NPS Withdrawal Rules

You can withdraw up to 60% of your NPS investment on retirement. The remaining 40% must be used to buy an annuity.

The conditions are as follows:

i. You must have completed 60 years of age
ii. The withdrawal is subject to a tax deduction as per income tax rules

The National Pension Scheme (NPS) scheme offers both online and offline ways for subscribers to make partial withdrawals.

Online Method

You must initiate the withdrawal request through your NPS account log-in.

1. The online method to make a partial withdrawal from an NPS account is through the eNPS portal.

2. You must log in to your account and submit the request for partial withdrawal.

3. Such request will be verified and authorized by the relevant POP

4. The request will be approved by the Pension Fund Regulatory and Development Authority (PFRDA) and the amount will be transferred to your bank account.

Offline Method

The offline method to make a partial withdrawal from the NPS account is by submitting the withdrawal form at the NPS office. The request will be approved by the PFRDA, and the amount will be transferred to your bank account.

Exit or Complete Withdrawal from NPS

Exit from NPS National Pension System (NPS) is allowed as per the following conditions:

After attaining the age of 60 years. 100% withdrawal permitted only if the corpus is less than or equal to Rs. 5 lakhs
Because of severe disability
Because of terminal illness
After completion of 20 years of subscription

The process of full withdrawal from the National Pension System (NPS) is as follows:

1. You must submit a request for withdrawal in the prescribed format

2. The withdrawal request must be accompanied by the following documents:

a. A copy of your PAN card
b. Your bank account statement
c. Your latest NPS account statement

The concerned NPS authority will process the request for withdrawal and release the withdrawal amount to the subscriber's bank account within 30 days from the date of receipt of the request.

Recommended Reading - How to Invest in National Pension System

Drawing Pension using NPS Withdrawals

If you are withdrawing from NPS after your superannuation and after attaining 60 years of age, you have a chance to:

- Withdraw tax-free pension from NPS
- Build a tax-free pension from NPS withdrawals

NPS allows you to stay invested up to the age of 70 and tax-free withdrawal of up to 60% of the corpus at the age of 60. That means, if you have a corpus of Rs 1 crore at 60, you can withdraw up to Rs 60 lakhs without increasing your income tax.

Also Read - How to Withdraw Pension Online?

Building Tax-Free Annuities

The remaining 40% of the corpus must be invested in an annuity plan. If you must, you can invest the Rs 40 lakhs in a pension plan right away and continue to withdraw your lump sum corpus over an extended period.

Using ULIP & PPF

Or you can withdraw a fixed sum and invest it in ULIP plans and PPF. Annual investment up to Rs 2.5 lakhs will keep your ULIP tax-free. You can choose safer funds to ensure steady and safe growth of your capital. ULIPs like Invest 4G from Canara HSBC Life Insurance allow you to invest in plans which will continue up to the age of 99. Investments up to Rs 1.5 lakhs in PPF are also tax-free.

Both plans allow partial withdrawals after five years of investment. However, you can give the corpus 10 years or more to grow further, since you already have a pension plan running.

Also Read - Defined Benefit Pension Plan

Tax-Free Bonds

Apart from these Tax-free bonds also allow you to earn a tax-exempt pension from your tax-free corpus of NPS.

In a nutshell, the process of partial/full withdrawal from the National Pension System (NPS) is quite simple. The account holder can submit a request for withdrawal either online or offline. The account holder needs to fill up a form and submit it to the nodal office, along with the required documents. The nodal office will then process the request and release the funds to the account holder.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.

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