NPS Withdrawal Rules – Partial or Premature Withdrawal Rules

NPS, or National Pension System, is a long-term asset designed to provide financial security after retirement. It offers flexibility for partial and premature withdrawals under specific conditions.

Even when the scheme matures, subscribers have various withdrawal options, subject to specific guidelines. Knowing the various withdrawal options, whether investing online or through a broker, can help you manage your investment more effectively. A regular NPS withdrawal can be made as the subscriber reaches the age of 60 years. Early withdrawal is also permitted, subject to specific conditions and limits. Let us discuss the NPS withdrawal rules in detail.

Understanding NPS Withdrawal Rules

The most recent NPS withdrawal rules, along with the investment procedure, legalities, and all related policy developments concerning NPS, are administered by PFRDA (Pension Fund Regulatory and Development Authority). According to the guidelines of PFRDA, an overview of the prevailing NPS withdrawal rules for government employees and corporate employees is listed below:

• Anyone from the government or private sector can withdraw a maximum of 60 percent of the NPS corpus as a lump sum after retirement. The remaining 40 percent must be utilized to purchase annuities. In NPS, annuities are monthly payments a subscriber receives from an ASP (Annuity Service Provider).
• If the NPS corpus is less than INR 2 lakh, the entire amount can be withdrawn as a lump sum.
• As per the existing NPS withdrawal rules, a government employee who chooses voluntary retirement must utilize at least 80 percent of the NPS corpus to purchase annuities. The whole amount may be withdrawn if the corpus is less than INR 1 lakh.
• In the event of the subscriber’s premature demise, the entire NPS corpus will be paid as a lump sum to the nominee or legal heir.
• The subscriber is entitled to a partial NPS withdrawal only if they have invested in the scheme for a minimum of three years. Moreover, NPS partial withdrawal is permissible only in exceptional cases like covering medical costs, funding the education and marriage of children.

• Filled and signed stamped receipt, along with the revenue stamp of the NPS subscriber.
• KYC documents and PAN card.
• Cancelled cheque, bank passbook, bank’s letterhead, and bank statement with proof of the account holder’s name, account number, and IFSC code.
• If entitled to full withdrawal, the applicant must also submit an undertaking-cum-request form.

NPS Partial Withdrawal Rules

If a subscriber wishes to withdraw their NPS investment before superannuation (at the age of 60 years), it is permitted by the PFRDA. However, specific NPS withdrawal conditions must be met:

• For government and corporate employees, partial NPS withdrawal rules state that the subscriber must have been a subscriber for at least three years from the joining date. For the “All Citizens” sector, the PRAN (Permanent Retirement Account Number) generation date is considered.
• The subscriber is permitted to make withdrawals not more than three times during the entire subscription tenure.
• The subscriber may withdraw an amount not exceeding 25% of their own contributions.

NPS Partial Withdrawal Process

According to the PFRDA, the subscriber can initiate a partial withdrawal based on self-declaration. Additionally, no supporting documents are required for this partial withdrawal. Here are the steps the subscriber must follow:

• You can request a partial withdrawal online on the CRA (Central Recordkeeping Agency) system (www.cra-nsdl.com) by logging in with PRAN using your User ID and Password.
• Next, choose the option “Tier 1 Partial Withdrawal” under the “Continuation & Withdrawal” tab. Here, you will see the amount eligible for partial withdrawal.
• You must provide the necessary percentage and purpose of the partial withdrawal.
• At the time of processing your request, your bank account will be verified through an online bank account verification process. Your bank must be on the empanelment list for online bank account verification. Upon successful verification, you can initiate the withdrawal request.
• You must confirm the self-declaration for the reason for partial withdrawal.
• You must submit the request with OTP authentication or eSign. For OTP verification, two OTPs will be sent to your mobile number and email registered with CRA. If you use eSign, an OTP will be sent to your Aadhaar-registered mobile number.
• If the submission is successful, the withdrawal request will be executed in the CRA system. You will not need to submit any supporting documents.
• The partial withdrawal amount will be transferred to your bank account within the specified timeframe.

Also Read: How to Open an NPS Account?

NPS Premature Withdrawal Rules 

Below, we have discussed the conditions for opting for premature withdrawal or voluntary retirement.

Government Sector

• As per the NPS withdrawal rules for govt employees, a complete lump sum withdrawal is permitted if the corpus is less than or equal to INR 2.5 lakh. 
• If the corpus is greater than INR 2.5 lakh, about 80% of the accrued pension wealth must be utilized to purchase an annuity. The annuity will provide the subscriber with a monthly pension, and the remaining 20% will be paid to the subscriber as a lump sum.
• The subscriber may choose to continue in the NPS under the “All Citizen” mode after executing an ISS (Inter Sector Shifting).

Non-Government Sector

• A minimum subscription period of five years is mandatory if the subscriber belongs to the private sector.
• A full lump sum withdrawal is permitted if the corpus is less than or equal to INR 2.5 lakh.
• If the corpus is greater than INR 2.5 lakh, at least 80% of the accumulated pension wealth must be utilized to purchase an annuity. The remaining 20% is paid to the subscriber as a lump sum.

How to Check the Status of NPS Withdrawal?

A subscriber can check the NPS withdrawal status by following any of the methods below:

• You can check the status of NPS withdrawal via the Limited Access View (pre-log-in) function. This option is available on the home page of the CRA website.
• You can also check the NPS withdrawal status by choosing “Withdrawal Request Status View” under the “Exit Withdrawal Request” menu by logging into your NPS account.

Also Read: NPS vs PPF

Conclusion

This article outlines the conditions and rules for NPS withdrawals. It highlights that partial withdrawals, which are subject to specific rules, allow individuals to address urgent needs such as funding children’s education or marriage, covering medical costs for serious illnesses, or buying/constructing a residential property. As an NPS subscriber, it is crucial to be mindful of all withdrawal rules and adhere to them throughout your investment journey.