Withdrawal Rules To Know For NPS

Save & Invest

You need to save and invest your money to lead a good life even after you retire. It does not matter if you are in business or service; you must opt for NPS. The NPS, or National Pension Scheme, is a long-term savings option that will mature after you retire from work or attain 60 years of age. NPS operates under the Government of India and the PFRDA.

If you want to invest in NPS or are already investing, you must know that you can withdraw your NPS corpus as an annuity or lump sum. But if there is an urgent need, you can opt for partial withdrawal, subject to some rules. Read on to learn more about the NPS pension scheme and how to withdraw your money.

How to withdraw money from the NPS?

In the normal course, you can opt to get your NPS corpus as a lump sum or as an annuity after you retire from work, i.e., when you are 60. You can also draw money from the National Pension Scheme before you retire if there is an urgent need. But this option is subject to the rules of the PFRDA in terms of age, corpus amount, time, and other factors. You can draw money through online or offline methods, as you prefer.

Here are some key rules related to this process:

  • After you retire, you can draw 60% of your NPS corpus as a lump sum, while the other 40% must be used to purchase an annuity.
  • You can extend the NPS scheme until you reach 70 if you do not want a lump-sum withdrawal.
  • If your entire NPS corpus is not more than Rs 2 lakh, you can get the entire amount as a lump sum.
  • If you work with a government and opt for VRS, you must use not less than 80% of the NPS corpus to purchase annuities. You can get the entire amount if the corpus is below Rs. 1 lakh.
  • In the event of your death before the given age, your legal heir or nominee will get the entire NPS corpus.
  • Partial withdrawal is possible only after three years of starting your NPS account.

Partial Withdrawal from NPS

You can get some money from your NPS corpus, per the present rules. If you are in urgent need of cash, you can make a partial withdrawal that is tax-free. You must apply with PFRDA online or through your POP service provider. This facility comes with some very strict rules, such as:

  • The amount must be less than 25% of the money you have put into the scheme.
  • Your NPS account must be more than three years old.
  • This facility is available for some urgent needs, like
    • Further education of your child.
    • Your child’s marriage
    • Paying for your first house (by yourself or with a spouse).
    • Urgent health treatment for cancer or organ transplant.
    • Serious accident that has a life-threatening risk.
    • Other ailments, as stated by the PFRDA.

You can make three partial withdrawals during the entire tenure of the NPS. There must also be a gap of at least five years between each such withdrawal.

NPS Withdrawal After Retirement

Here are the key rules you must note if you want to wait until the time you retire to withdraw money from the National Pension Scheme:

  • When you reach the age of 60, you can withdraw the entire corpus. You will get 60% as a lump sum out of the entire amount in NPS, while the other 40% must be used to get an annuity.
  • Here, the lump-sum amount will be tax-free, but the annuity will be subject to income tax rules. You will have to pay tax on it per the present IT rules.
  • If the entire corpus is less than Rs. 5 lakh, there is no need to get an annuity plan. You can opt for a lump sum that will be tax-free.
  • If you do not want to close your NPS account when you retire, you can extend it until you are 70.

NPS Withdrawal After Voluntary Retirement

If you work for the government and want to take VRS before the given age as per NPS, you can opt out of NPS. However, some restrictions will apply, such as:

  • Your NPS account must be at least 10 years old if you want to draw money before you reach the age to retire.
  • If your total corpus is not more than Rs. 2.5 lakhs and if you opt out of NPS due to VRS, you can get the entire amount as a lump sum.
  • If your National Pension Scheme corpus is more than Rs. 2.5 lakhs, then you will only get 20% of the amount as a lump sum, and with the balance of 80%, you must get an annuity plan.
  • This withdrawal will be subject to taxation as per the IT rules at that time.

NPS Withdrawal After Death

There are various rules you must note regarding NPS withdrawal in case you die before reaching the age of 60.

  • If you work in the private sector, your legal heir or nominee will get the entire NPS corpus as a lump sum.
  • Your legal heir or nominee must get an annuity plan if you work for a government body. No lump-sum withdrawal will be offered.

The National Pension Scheme is a good option for you to plan your life after you retire from work. If you want to explore other options, then visit Piramal Finance. Their experts have shared good advice through blogs and articles to help you make an informed decision. This will help you plan for a good life after retirement.