NPS Withdrawal Rules: A Comprehensive Guide to Partial, Premature, and Age 60 Withdrawals

National Pension Scheme (NPS) is considered to be the best option for saving for post-retirement expenses. It is a government scheme, so investing in it is completely safe.

Long-term investment creates a large fund, which is very useful after retirement. Also, regular income is also available in the form of a pension every month.

But, all these benefits are available only after the age of 60. That is why many people do not invest in NPS, because they feel that if money is needed in between, then the money deposited in NPS will not work.

But, this is not true. Withdrawing money from NPS is possible even before the age of 60.

Today through this article we know its terms and conditions.

Partial Withdrawal

A Investor can withdraw some money only after three years of opening an NPS account.

The Investor can withdraw up to 25% of his total contribution.

PFRDA has allowed the withdrawal of a 25% contribution under certain circumstances.

The customer can withdraw money for higher education for himself or his children.

The customer can withdraw money for the marriage of himself or his children.

If the customer does not have his own house, he can withdraw money to buy a house.

The customer can also withdraw money for the treatment of himself, his wife/husband accordingly, or children.

But, this money can be withdrawn only for the treatment of serious diseases like cancer, kidney and heart disease.

Note that the customer is allowed partial withdrawal three times during the tenure of NPS. There should be a gap of at least 5 years between one withdrawal and another.

Premature Withdrawal

If the customer wants to withdraw money from NPS before the age of 60 for any reason, then he can withdraw the money after 10 years of opening the account.

But, there are some conditions for this.80% of the corpus has to be used to buy an annuity. You will get a pension every month from this annuity.

20% of the corpus i.e. the total prepared fund is allowed to be withdrawn in a lump sum.

This means that if the subscriber wants to withdraw his money after 10 years, he will have to use 80% of the total funds to buy an annuity.

This will give him a pension every month, which is the main purpose of investing in NPS.

Withdrawal on death before 60 years

If the Investor dies before the age of 60, his nominee or legal heir can withdraw the entire amount deposited in NPS in a lump sum.

In such a situation, there is no need to buy an annuity. This gives the subscriber’s family the entire amount in a lump sum.

How much tax will be levied

It is important to understand the tax rules applicable to premature withdrawal. Partial withdrawal i.e. up to 25% of the NPS corpus is tax-free.

If the Investor wants to withdraw the entire amount before the stipulated time, then 20% of the lump sum amount will be taxed.

Keep in mind that only 20% of the amount is allowed as a lump sum withdrawal if the entire amount is withdrawn prematurely.

You will have to buy an annuity with the rest of the money. The pension received from the annuity will be taxed as per the subscriber’s income tax slab.

It is clear from the above rules for withdrawal before the age of 60 that PFRDA has allowed the subscriber to withdraw money if needed.

But, it has also kept in mind that the subscriber’s main motive for investing in NPS should be to get regular income after retirement.