What are the National Pension Scheme (NPS) withdrawal rules?

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I could notice while discussing with my friends, relatives and others that they are somewhat confused or sometimes ignorant about the NPS withdrawal rules, which is also one of the reasons why they are not investing in NPS. Hence I have jotted down the NPS withdrawal rules below, which will help you to make some informed decisions when it comes to investing in NPS and withdrawal of the NPS corpus.

A subscriber can withdraw from NPS in the following situations/conditions:

  • Partial Withdrawal – After three years, the subscriber may withdraw 25% of his or her own payments for defined reasons such as illness, disability, child schooling or marriage, property purchase, or the launch of a new company. A subscriber can make partial withdrawals up to three times throughout his or her NPS tenure.
  • Premature Withdrawal – After 5 years or before the completion of 3 years (if the subscriber joined NPS after reaching 60 years of age), the subscriber can take up to 20% of the corpus as a lumpsum payment, and the remaining 80% must be used to purchase an annuity plan to get the pension. If the cumulative corpus is less than Rs. 2.5 lakh, the full amount is paid in a lump sum to the subscriber.
  • Normal Withdrawal – On reaching 60 years of age (if the subscriber had joined NPS before 60 years of age) or after three years (if the subscriber joined NPS after 60 years of age), the subscriber can withdraw up to 60% of the corpus as a lump sum, and the remaining 40% of the corpus is used to purchase an annuity plan to receive the pension. If the overall corpus is less than ₹5 lakhs, the full amount is given in a lump sum to the subscriber. In the event of a NPS subscriber’s death, the nominee/legal successor can withdraw the full accumulated amount. If the nominee or family members of the dead subscriber so wish, they can purchase an annuity as well.

Subscriber also has the option to:

  1. Stay in NPS until the age of 75 or quit at any point before then.
  2. When exiting NPS, the subscriber can postpone getting the lumpsum payment (60% of the corpus) or withdraw it in instalments until the age of 75. The subscriber can also postpone annuity purchase (40% of the corpus) until the age of 75.
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