NPS withdrawal rules: The Public Sector Undertaking (PFRDA) recently revised the NPS withdrawal rules, increasing the attractiveness of this retirement savings scheme. Subscribers are now permitted to withdraw their entire corpus under certain circumstances. This has alleviated liquidity issues in the scheme.
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NPS Withdrawal Rules: People’s interest in the National Pension System (NPS) is growing. Recent changes to this retirement savings scheme are also contributing to this. NPS withdrawal rules have been simplified. Subscribers are allowed to withdraw their entire corpus under certain circumstances. Let’s explore these in detail.
What if you are 60 years old and have a total corpus of up to ₹8 lakh?
Kunal Kabra, founder of Custodian.life, said, “PFRDA has allowed NPS subscribers to withdraw their entire corpus under certain circumstances. If a subscriber’s total corpus does not exceed ₹8 lakh, they can withdraw the entire corpus at or after 60 years of age. Previously, the limit was ₹5 lakh. PFRDA recently increased this limit to ₹8 lakh.”
If a subscriber wishes to withdraw 100% of their funds before the age of 60, there are two conditions. First, the NPS must have completed at least five years and the total corpus must be up to ₹5 lakh. Upon the subscriber’s death, the entire corpus is passed on to the nominee or legal heir. There is no fund limit for this.
What if the total corpus in the NPS exceeds ₹8 lakh?
If the NPS corpus exceeds ₹8 lakh, it is mandatory to purchase an annuity. The rules for this vary depending on the subscriber’s category. “If the subscriber is not a government employee and the NPS corpus exceeds ₹12 lakh, at least 20% of the corpus must be used to purchase an annuity. This means that the subscriber can withdraw 80% (only 60% is tax-free) in one lump sum,” Kabar said.
He said that if the subscriber is a government employee and the NPS corpus exceeds Rs 12 lakh, then 60% of the amount must be used to purchase an annuity. This means that 60% of the money can be withdrawn in one lump sum.
What if the age is less than 60 years?
According to Rule 4(1)(b) of the PFRDA Exit Regulations, if a subscriber wishes to withdraw funds before reaching the age of 60, they can do so after completing at least five years of NPS service. If the total corpus does not exceed ₹5 lakh, they can withdraw the entire corpus. If the corpus exceeds ₹5 lakh, they must use 80% of the corpus to purchase an annuity. The remaining corpus can be withdrawn in a lump sum.
