Withdraw from NPS Easily with These Simple Tips

NPS refers to the National Pension Scheme. It is a defined contribution pension scheme, that was launched by the Government of India in the year 2004. NPS is governed by the PFRDA or Pension Fund Regulatory and Development Authority and is available to all between the ages 18 to 65 years. The scheme started with the aim to stop defined-benefit pensions.

The scheme comes with several restrictions and conditions to NPS withdrawal and account holders need to know the same. Here's a detailed version of the specifications.

NPS Withdrawal Rules

For Partial NPS Withdrawal

It is available only for the purchase or construction of a house, treatment of specific illnesses, children's weddings and their higher education.

The rules are as follows:

• The NPS account needs to be held by the subscribers for at least three years.
• Amount withdrawal is restricted to 25% of the account holder's contribution.
• Three withdrawal are allowed during the entire lock-in period with at least 5 years' gap between each withdrawal.

For Retirement

The rules are as follows:

• When the accumulated corpus in the account is Rs.2 lakh or less, the entire fund can be withdrawn.
• If it is more, 40% of the fund will go to purchasing annuity plan.
• Balance is allowed to be withdrawn in lumpsum; it can be postponed till 70 years of age.

Note that the fund that can be withdrawn (60% of total corpus) is exempt from taxation. However, the annuity will be taxable each year after received as per the income tax slab.

For Voluntary Exit

NPS subscribers can exit the scheme before the tenure completes.

The rules are as follows:

• S/he should have held the account for at least 10 years.
• The entire amount can be withdrawn if the accumulated corpus is less than Rs.1 lakh.
• In case it is more, then 80% goes to annuity plan purchase.

Note that both withdrawal amount and annuity (when paid) are taxable. The amount used to purchase annuity will be taxed each year.

After Maturity

The rules are as follows:

• The maximum age to subscribe is 70 years. The exit limit is 75 years.
• Existing NPS account holders can invest beyond 60 years while their account is extended to 70 years.
• One can stay longer to generate a higher corpus. After maturity, one can defer the purchase of an annuity/withdrawal of any amount for up to 3 years from the time s/he turns 60 years of age or reaches superannuation age, whichever is earlier.
• Same as retirement scenario, withdrawal of maximum 60% corpus is allowed while the rest goes toward purchasing an annuity plan.

You may also like "PPF vs NPS - Which Fits Your Retirement Goals"

For Death of a Subscriber

The rules are as follows:

• For private sector employees: Upon the death of an NPS subscriber, the legal heir or nominee gets to withdraw the entire corpus of the deceased.
• For government employees: One needs to purchase an annuity plan.

NPS Withdrawal Process

The withdrawal process for NPS is different for Tier 1 and Tier 2 accounts.

NPS Tier 1 Withdrawal

Online NPS withdrawal from Tier 1 account steps:

• Start by visiting the official website of NSDL-CRA.
• You are supposed to enter your user ID (PRAN) along with your password.
• Once logged in, you need to go to the "Transact Online" tab.
• Select "Withdrawal."
• Again, you need to select the option "Partial withdrawal from Tier-I" from the options that will come available to you.
• Now confirm your PRAN and click on "Submit."
• Go ahead entering the percentage of funds you need to withdraw. This will be accompanied by the entering of the reason of withdraw.
• Finally, you can again click the available Submit option.

Note that while the online process is done here, you need to take care of the documentation for the remaining process. This includes the form generated as you completed the online process, in addition to the below-mentioned documents, to be submitted to the nodal office.

Documents required:

• KYC documents
• Original PRAN card
• Advance stamp receipt filled and cross-signed on the revenue stamp by you (the account holder).
• Bank passbook, bank letterhead, bank certificate, or a cancelled cheque with your name, bank IFSC code and bank account number.
• Request cum undertaking form when you're eligible for complete withdrawal.

Offline NPS Withdrawal from Tier 1 account steps:

• Download relevant forms
• Fill the forms with relevant details
• Submit the same with the supporting documents mentioned above at the nearest Point of Presence Service Provider (PoP/PoP-SP).

NPS Tier 2 Withdrawal

You can carry out this offline by filling UOS-S12 form, and attaching the same all documents. PoP initiates the request and the amount is disbursed within three days' time.

Recent article "How to Activate PhonePe UPI using Aadhaar?"