The NPS or the National Pension System, is a retirement savings program for the long term with the intention of being secure financially at retirement . However, since life is so uncertain, the subscriber may be required to withdraw from the fund before maturity or even after maturity.
It is very important for anybody who intends to commit their hard-earned money into something such as NPS to understand the withdrawal rules.
The current guide includes Tier-I and Tier-II withdrawal rules, provisions for partial withdrawals, rules for the corporate sector, and government sector provisions, along with the latest 2025 updates. It is educated on these rules, especially if in the pipeline of retirement or during emergencies.
The Understanding of NPS Withdrawal Rules
NPS withdrawal provisions are such that they allow very theoretical financial freedom to any subscriber. There are conditions that apply depending on whether one is an early exit or they are retiring from service, or in unfortunate cases, death.
Essence of NPS Withdrawal Rules 2025
- At retirement (age 60), a retiree is allowed to withdraw up to 60% of the corpus as a lump sum.
- The remaining 40% is to be used for the purchase of an annuity for regular income post-retirement.
- If the early exit happened before the age of 60, he is allowed to withdraw 20% of the amount as a lump sum, with 80% going to an annuity.
- Death of the subscriber? The entire corpus goes to the nominee and, hence, gives immediate financial support.
NPS Withdrawal Rules for Corporate Employees
1. Withdrawal at Retirement (Age 60 or Superannuation)
- If the total corpus does not exceed ₹5 lakh, the entire amount can be withdrawn tax-free.
- For amounts exceeding ₹5 lakh, tax-free withdrawal to the extent of 60% and mandatory purchase of annuity with the remaining 40%.
2. Before 60, at Early Retirement
- A full withdrawal is possible for a corpus of ₹2.5 lakh or less.
- For more than that, the allowed amount is 20%, and 80% must be put into an annuity.
3. Death of a Corporate Employee
- The entire corpus is transferred to the nominee or legal heir without annuity obligations.
- This makes sure immediate liquidity is available to the family in tough times.
NPS Withdrawal Rules for Government Employees
1. Withdrawal at Retirement (Aged 60 or upon Superannuation)
- If the corpus is up to ₹5 lakh, 100% withdrawal is possible.
- If the corpus is over that threshold, 60% will be allowed withdrawal, while 40% must go into an annuity.
2. Early Retirement (Before Age 60)
- If the corpus was ₹2.5 lakh or less, total withdrawal is allowed.
- For the higher amounts, that is, above ₹2.5 lakh, the person is allowed to withdraw only 20% of the corpus, with the remaining 80% going to an annuity.
3. Death of a Government Employee
- A nominee can withdraw 100% if the corpus is ₹5 lakh or less.
- For amounts above ₹5 lakh, 80% has to go into an annuity, while 20% can be taken as a lump sum .
New NPS Withdrawal Rules (2025 Updates)
The Pension Fund Regulatory and Development Authority (PFRDA) has introduced key changes:
No Self-Declaration for Government Subscribers
- From January 1, 2025, government employees cannot use self-declaration for partial withdrawals.
- Mandatory document submission (PRAN card, ID proof, bank details) is required.
Instant Bank Account Verification
- A penny-drop method (₹1 credit) verifies bank accounts before processing withdrawals.
- Systematic Lump Sum Withdrawal (SLW) Facility
- Subscribers can withdraw fixed amounts monthly, quarterly, or annually (up to 60% of corpus).
- The remaining 40% must be used for an annuity.
Extended Withdrawal Age (Up to 75 Years)
- Subscribers can delay withdrawals until 75, allowing the corpus to grow further.