When you invest in the National Pension System (NPS) as part of your retirement planning, your money is locked in until the age of 60 years. The intention is to ensure that you, as a subscriber, build a sizeable corpus at the time of retirement.
This corpus is then invested in an annuity scheme, which offers a pension during the post-retirement years.
However, under certain circumstances, you can withdraw a part of the NPS amount before maturity. You can also make a partial withdrawal in case of emergencies. Let us see understand the withdrawal rules for NPS accounts in detail.
(1) Partial withdrawal
For partial withdrawal, Subscriber must have an NPS account for minimum 5 years and can withdraw 25% of his own contribution.
Subscriber can initiate Online Withdrawal request through their NPS account log-in. Such a request needs to be verified and authorized by the associated Points Of Presence (POP). In case Subscriber is not able to initiate online Withdrawal request,
he or she needs to submit the physical Withdrawal form along with the required documents to the POP. Based on Subscriber's request, POP will initiate the online Withdrawal request on behalf of the Subscriber.
The following documents are required to be submitted along with the duly filled Withdrawal form for Superannuation & Pre-mature Exit:
- Original PRAN card
- Advanced stamped receipt, to be duly filled and cross-signed on the Revenue stamp by the Subscriber.
- KYC documents (address and photo-id proof)
- Cancelled Cheque’ (having Subscriber’s Name, Bank Account Number and IFS Code) or ‘Bank Certificate’ on Bank Letterhead having Subscriber’s name, Bank Account Number and IFS Code required to be submitted as bank
proof. ‘Copy of Bank Passbook’ can be accepted, however, it should have Subscriber’s photograph, Name and IFS Code on it and should be self-attested by the Subscriber.
- "Request Cum Undertaking" form if eligible for complete Withdrawal.
After submitting required documents, POP will authorise the Withdrawal request
(2) Withdrawal after retirementIf your NPS account corpus is less than or equal to Rs. 5,00,000, you can withdraw the entire amount after you retire. This withdrawal will be tax-free. However, if the total corpus exceeds Rs. 5,00,000,
you can withdraw up to 60% of the corpus. The remaining needs to be invested in an annuity plan.
[Also Read: Five smart investment avenues to plan your retirement]
(3) Withdrawal in case of voluntary retirement
If you choose to retire voluntarily before you complete the superannuation period, you can make withdrawals from your NPS Tier I account, subject to the following conditions:
- You must have invested in the NPS account for a minimum of 10 years.
- You can withdraw the entire amount if the corpus is less than Rs. 2,50,000.
- If the corpus is over Rs. 2,50,000, you can withdraw up to 20% of the corpus. The remaining must be invested in annuities.
(4) Withdrawal in case of death of the subscriber
If an NPS account holder dies, the legal heir or nominee can withdraw the entire corpus if the person belongs to the private sector. Purchasing an annuity is compulsory
if the deceased is a public sector employee.
Documents necessary for NPS withdrawal
Just like you need certain documents to open an NPS account, you also need to complete documentation to withdraw from your NPS account. Here is a list of the documents you will need
to produce:
- An advance stamped receipt that is filled up and signed
- Revenue stamp
- Your bank passbook, cancelled cheque, bank’s letterhead, and a certificate from the bank with proof of your account holder's name, number and IFSC code
- KYC documents
- Original PAN card
When you open an NPS account, it is important to know its withdrawal rules. Tier I NPS accounts have stringent withdrawal rules, as outlined above. However, if
you have invested money in the Tier II account, which is a voluntary NPS account, then these withdrawal rules do not apply. You can withdraw from the Tier II account at any point that you wish to. Know more about NPS account eligibility online.
Disclaimer: This Article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of axis bank ltd. And its employees. Axis bank ltd. And/Or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision. .
