With the National Pension System (NPS), you save during your working life and withdraw your corpus when needed—either after retirement or under certain conditions earlier. Withdrawals can be full, partial, or premature depending on your age, corpus, and reasons.
Types of NPS Withdrawals
Partial Withdrawal (Tier I only):
- Allowed after 3 years of contribution.
- Up to 25% of your own contributions (not total corpus).
- Maximum 3 times in total, with 5-year gap between withdrawals.
- Valid reasons: children’s education/marriage, house purchase/construction, critical illness treatment.
- These are tax-free withdrawals.
Premature Exit (before 60 years, Tier I):
- Must have been in NPS for at least 10 years.
- You can withdraw 20% of total corpus as lump sum; 80% must buy annuity.
- The lump sum and pension from annuity are both taxable as per income slab.
Normal Exit (at or after 60 years, Tier I):
- You can withdraw up to 60% of corpus as lump sum.
- Remaining 40% must purchase annuity.
- Lump sum withdrawal is tax-free; annuity payouts are taxable when received.
- If your corpus is ≤ ₹5 lakh, you may withdraw the entire amount as lump sum; annuity is optional. However, up to 40% may still be taxable.
Tier II Withdrawal:
- No withdrawal restrictions.
- Can withdraw anytime, any amount.
Online Withdrawal Steps (Tier I)
- Log in to your CRA portal (NSDL/Protean) using PRAN and IPIN.
- Go to “Transact Online” → “Withdrawal”.
- Select the type of withdrawal (partial/premature/normal).
- Fill details, upload proofs (e.g., education invoice, illness documents) if partial.
- Submit online and/or verify via your PoP provider.
- Amount is credited to your bank via ECS in 3–30 days.
Offline Withdrawal
Download the relevant form (UOS-S13/S14), attach documents, submit via PoP-SP branch. PoP verifies and processes the payout similarly.
Taxation Overview
- Partial withdrawal: Tax-free up to 25% of own contributions.
- Premature exit:
- 20% withdrawn taxed as per slab; annuity payments taxable later.
- Normal exit:
- 60% lump sum tax-exempt; annuity taxable at payout.
- Full withdrawal (≤ ₹5 lakh corpus): entire withdrawal potentially taxable or partly tax-free based on rules.
Quick Comparison Table
| Type | Minimum Tenure | Withdrawal % | Annuity Required | Tax Treatment |
|---|---|---|---|---|
| Partial (Tier I) | 3 years | ≤ 25% of self-contrib. | No | Tax-free |
| Premature Exit | 10 years | 20% of corpus | Yes (80%) | Lump sum taxable; annuity taxable later |
| Normal Exit (≥60 yrs) | 60 years | 60% corpus | Yes (40%) | Lump sum tax-free; annuity taxable later |
| Full Exit ≤₹5L corpus | N/A | 100% corpus | Optional | May be taxable (depending on rule) |
| Tier II | N/A | Any time, any amount | N/A | Depends on account type |
Final Takeaway
NPS offers flexible withdrawal options—partial, premature, or full—with varying tax impacts. Partial withdrawals are tax-free, lump sums upon retirement are mostly exempt, but annuity payouts and premature exits may be taxable. Withdrawals can be done online via CRA portal or offline through PoP. Ensure you meet tenure and documentation requirements to avoid delays or reversals.
