NPS Withdrawal Online: Rules, Process, Taxation & Exceptions

The Rule

If you are an NPS subscriber, you may, under certain conditions, withdraw your NPS corpus either prematurely or maturely. Additionally, in  an emergency, you may also opt for premature withdrawal of a portion of your funds. According to the corpus, age, and other variables, there are also matching withdrawal limits. The rules for NPS withdrawal vary for employees in the public and private sectors.

Government Sector Employee

• On Retirement: When government employees reach superannuation age (60 years old), theyare also eligible to take a lump sum withdrawal of up to 60% of the NPS corpus. The remaining 40% must be invested in annuities. However, they can withdraw the full amount if the corpus is up to ₹ 5 lakh. 

• On Voluntary Retirement: A government employee opting for voluntary retirement is required to use at least 80% of the NPS corpus to buy annuities under the existing NPS withdrawal regulations. In case the corpus is less than ₹ 2.5 lakh, the entire sum can be withdrawn.

• On Death: On the death of a government employee before retirement, the full value of their NPS corpus will be paid as a lump sum to their nominee or legal heir if it is up to ₹ 5 lakh. However, the annuity option is available to the nominee. If the corpus exceeds ₹ 5 lakh, the dependent must use 80% of the corpus to purchase a default annuity plan, with the remaining 20% being given as a lump sum to the nominee or legal heir. If none of the dependent family members—spouse, mother, and father is alive, then 80% of the corpus will go to the employee’s living children. Additionally, the legal heirs will receive the corpus if there are no children.

Private Sector Employees

• On Retirement: Private employees can withdraw up to 60% of the NPS corpus in one lump sum. The remaining 40% must be spent on an NPS annuity plan. If the entire accumulated corpus is less than ₹ 5 lakh, 100% withdrawal is permitted. 

• On Voluntary Retirement: If a private employee decides to retire early, they have the option to request a withdrawal from their NPS account. But they should hold onto their investment for at least five years. They will get lump sum payments for the remaining 20% of their entire cumulative corpus, with the remaining 80% having to be invested in annuity plans. However, 100% of the corpus would be paid in one lump sum if it is less than ₹ 2.5 lakh.  

• On Death: The subscriber’s nominee or legal heir receives the whole accumulated corpus in the event of an untimely death. The nominees have the option to purchase an NPS annuity plan. 

NPS Withdrawal Limit 

For Government Employee

For Private Employee

NPS Partial Withdrawal Rules

Partial withdrawal requests can be made online by subscribers to the National Pension System. Alternatively, they might send a form requesting a partial withdrawal to the Point of Presence – Service Provider. A subscriber may choose to withdraw part of their NPS subscription under the following conditions:

1. For partial withdrawals, the subscriber is required to keep an account with the National Pension System for a minimum of three years.
2. The amount of the partial withdrawal cannot be more than 25% of the total contributions.
3. During the scheme’s entire tenure, only three partial withdrawals are allowed. Additionally, the subscriber must wait five years between any two partial withdrawals.

NPS Premature Withdrawal Rules – Tier I & II

• Tier-1

1. In certain cases, NPS subscribers may opt for a partial withdrawal from the Tier I corpus. For example, chronic disease treatment, higher education, child marriage, and so on.
2. After three years of investment in NPS, an investor may withdraw up to 25% of their total contribution. 
3. An investor may submit three applications for partial NPS premature withdrawal during the duration of the investment.
4. All partial withdrawals can be done free of cost.

• Tier-2

1. The only way to withdraw from Tier II is via POP-SP. The subscriber must fill out form UOS-S12 and attach any required documentation. The withdrawal procedure is then started by the POP, and the payout is finished in three days.
2. Since Tier II accounts are voluntary, there are no withdrawal limits.
3. An investor can withdraw any amount for any reason.
4. Tax advantages are not available to Tier II accounts.

Reasons for NPS Partial Withdrawal

The following are some reasons for which you can request a partial withdrawal:

1. Education for your children, including any legally adopted children.
2. Marriage of your children, including any legally adopted children.
3. Purchasing or renovating a residential property in your name or jointly with your spouse.
4. Medical treatments that require hospitalization and care.
5. Meeting your medical and incidental expenses resulting from a disability.
6. Meeting the expenses for your skill development or re-skilling or any other self-development activities approved by PFRDA.
7. For your business or startup, as allowed under PFRDA regulations.

NPS Exceptions for Five-Year Gap Rule

The five-year gap rule does not apply in cases of serious illnesses. There are some identified critical illnesses, accidents, and life-threatening conditions such as:

1. Accident of a serious or life-threatening nature
2. Aorta Graft Surgery
3. Cancer
4. Coma
5. Coronary Artery Bypass Graft
6. Heart Valve Surgery
7. Kidney Failure (End Stage Renal Failure)
8. Major Organ Transplant
9. Multiple Sclerosis
10. Myocardial Infarction
11. Primary Pulmonary Arterial Hypertension
12. Paralysis
13. Stroke
14. Total blindness
15. Any critical illness that is life-threatening as stipulated in the guidelines, circulars, or notifications issued from time to time by the Authority

Documents required for NPS withdrawal

In order to withdraw from NPS, the following documents are required:

• PAN card, Aadhar Card, Passport etc as identity proofs.
• Electricity bill, telephone bill, Aadhar card, etc., for address proof. 
• Signed and filled advance stamped receipt, along with the revenue stamp of the concerned NPS subscriber.
• Proof of account holder name, number, and IFSC code such as bank certificate, bank passbook, canceled cheque, and bank letterhead
• If qualified for a full withdrawal, additional paperwork such as an undertaking cum request form and KYC documents must be submitted.

How to Withdraw NPS Online?

You must log in to the CRA website in order to make an NPS withdrawal for a Tier 1 or Tier 2 account. 

To log in, use your password and PRAN number. As soon as you log in, you must:

1. Select “Withdrawal” from the Transact Online tab.
2. Choose the type of withdrawal you must make next: full, partial, or early at superannuation. You will then be able to access the relevant NPS withdrawal form.
3. You will receive a system-generated NPS withdrawal form after verifying your PRAN information once more.
4. It is necessary to provide the nodal office with a completed copy of this form together with additional supporting documentation, such as nominee information, PAN number, KYC details, etc.

Frequently Asked Questions (FAQs)