What Are The NPS Withdrawal Rules?

The National Pension System (NPS) is an excellent, tax-saving pension scheme that aims to secure citizens' future after retirement. There are two types of NPS accounts: Tier-1 and Tier-2. Their differences are as follows:

When it comes to withdrawal, the subscribers must follow certain NPS withdrawal rules, which are as follows:

• For government and corporate employees upon retirement:
  • The subscriber must invest 40% of the accumulated corpus in an annuity and withdraw the remaining 60% as a lump sum (Tax Free).
  • The subscriber may defer the lump sum withdrawal up to 70 years of age.
  • The individual can withdraw the entire corpus if their accumulated pension is below Rs. 2 Lakh.
• For government employees taking early retirement:
  • The individual must invest at least 80% of the corpus in annuity.
  • The subscriber can withdraw the entire amount if the corpus is below Rs. 1 Lakh.
• In case of the government and corporate employee’s death:
  • The employee’s legal heir or nominee receives the entire amount.
• Corporate employees or citizens on voluntary exit:
  • The subscriber must have continued investment for at least ten years.
  • The individual must invest 80% of the corpus in annuity.
  • The subscriber can withdraw the entire amount if the accumulated amount is less than Rs. 1 Lakh.

Rules for Partial Withdrawal from NPS

NPS subscribers can withdraw a specific amount from their contributions for specific purposes, known as a partial withdrawal. They can go for a partial withdrawal only for purposes like children’s higher education or marriage, purchasing or constructing a residential house, or treatment for a critical illness.

Moreover, the subscriber can make only three partial withdrawals during the tenure, and there should be a gap of at least five years between each withdrawal unless there is a medical emergency. Furthermore, subscribers can only withdraw up to 25% of their NPS contribution to date.

As for eligibility, the subscriber should have been investing in the NPS for at least three years to qualify for a partial withdrawal.

NPS Rules for Premature Withdrawal – Tier 1 & Tier II Accounts

These are the premature withdrawal conditions for Tier I and Tier II accounts:

For Tier I Account: For partial withdrawal, an individual should have completed 3 years of participation under NPS is eligible for Partial withdrawal. Partial withdrawal is allowed upto 25% of Individual / Volunatry contribution.

For Tier II Account: Individuals investing in the Tier II account can make unlimited withdrawals. Therefore, it is like a savings bank account offering more flexibility in terms of partial withdrawals.

Documents Required for NPS Withdrawal

The following are the documents required for premature NPS withdrawal:

• Advanced stamped receipt filled and cross-signed by the subscriber on the revenue stamp
• Original PRAN card
• KYC documents like address and photo ID proof
• Cancelled cheque with the subscriber’s name, bank account number and IFS code, or Bank certificate with these details
• Request Cum Undertaking form for complete withdrawal

After submitting the necessary documents, the Point of Presence (PoP) will verify and authorise the withdrawal request.

How to Withdraw NPS Online?

Withdrawal for a Tier II account is possible only through the offline method. The procedure to withdraw NPS online for a Tier 1 account is as follows:

• Visit the official website or download the NSDL-CRA app.
• Log in using the user ID (PRAN) and password.
• Select ‘Withdrawal’ under the ‘Transact Online’ tab.
• Select ‘Partial withdrawal from Tier-I.
• Confirm PRAN.
• Click ‘submit’.
• Enter the funds percentage and the reason for withdrawal.
• Click ‘submit’.

The process will generate a form the subscriber must fill out and submit at the nodal office with the required documents. Ensure the details are correct and provide the accurate bank account number to receive the amount securely and quickly. The website and app use sufficient security measures and authentication protocols to ensure safety during the transaction.

How to Withdraw NPS Offline?

The subscriber must download the relevant partial, retirement, or exit withdrawal forms. After filling out the form with the relevant details and attaching supporting documents, they must submit it at their nearest PoP office. For a Tier II account, they must fill out a UOS-S12 form, attach the supporting documents, and submit it at their nearest Points of Presence - Service Provider (PoP-SP) office. The PoP will verify and disburse the amount within three days.

How to Check the Status of NPS Withdrawal?

After submitting the NPS withdrawal request, the subscriber can check its status online by logging in to the website or app and entering their PRAN number. They can also use the reference number received to check the application status. Once the PoP verifies and approves the withdrawal request, the subscriber receives a notification via SMS or email. If the process takes over three days, one must contact the POP to resolve any verification-related issue.

Conclusion

As for NPS withdrawal rules, a subscriber can withdraw only a certain percentage of their accumulated corpus for a specific number of times only. However, since withdrawals compromise the corpus, interest, pension benefits, and tax exemptions, one must opt for it only when inevitable. Knowing the applicable rules and limits will help make informed decisions and plan the finances appropriately. Only with proper planning and management, a subscriber can get the most from the NPS and secure their future.