The Tier-1 NPS account, being a retirement savings plan, restricts withdrawal of accumulated funds till the subscriber turns 60 and the account matures. However, NPS gives individual subscribers the flexibility to make partial withdrawals and premature exits before completion of 60 years.
Upon maturity, if your corpus exceeds 2 lakhs, you will only be allowed to withdraw 60% of the corpus (tax free u/s Section 10 (12A) as a lump sum. The rest of the 40% will be annuitized.
7 different kinds of annuity plans approved by the PFRDA
- Annuity for life
- Annuity guaranteed for 5, 10, 15 or 20 years and for life thereafter
- Annuity for life with return of purchase price on death
- Annuity for life increasing at a simple rate of 3% p.a
- Annuity for life with a provision of 50% of the annuity payable to spouse of the annuitant for life after death of the annuitant
- Annuity for life with a provision of 100% of the annuity payable to spouse of the annuitant for life after death of the annuitant
- Annuity for life with a provision of 100% of the annuity payable to spouse of the annuitant for life after death of the annuitant, with return of purchase price on the death of the last survivor
- A subscriber may extend the investment period up to 70 years of age
- Fresh contributions are allowed during such a period of deferment
- Minimum 40% has to be used for buying annuities from an approved annuity service provider
Tax-free partial withdrawals in NPS are allowed after a 3-year lock-in period up to a maximum of 25% of the total amount invested in individual capacity.
Partial withdrawal is allowed subject to the following condition
- Children’s higher education
- Marriage of children
- Purchase /construction of house
- Critical illness (including Covid 19)
- Disability (more than 75%)
- Skill Development or re-skilling any other self-development activities
- Establishment of own venture or start up
- Individual subscribers will only be allowed a maximum of three withdrawals during the entire tenure of subscription
- Premature withdrawals in NPS are not allowed from the employer contributions
Premature or early exits are allowed on completion of the 10th year in NPS but a lumpsum withdrawal is limited to a maximum of 20% of the total amount.
A premature exit from NPS is permitted subject to the following conditions
- Only 20% of the total corpus can be withdrawn
- The remaining 80% has to be used to purchase a life annuity from any PFRDA empanelled Life Insurance Company
- If Corpus < Rs. 1.00 Lac, complete withdrawal may be opted
- The NPS account will be closed post withdrawal
In case of the unfortunate demise of the subscriber before completion of 60 years/maturity, the nominee can withdraw 100% of the corpus.
Nominee / Legal heir would receive proceeds as per the selected annuity plan (pension).