The National Pension System (NPS) was introduced to offer financial security to citizens by providing them with a monthly pension amount post their retirement. However, there may be circumstances where an individual would be in dire need of money to meet a financial emergency, for which, the NPS facilitates multiple withdrawal options.
What is NPS Withdrawal?
The National Pension System (NPS) is a popular retirement savings scheme in India. But life is unpredictable, and sometimes, you might need to take out some money from your NPS account. This process of taking money out of your NPS account is called NPS Withdrawal.
NPS Withdrawal lets you access and use your savings in different ways, whether it’s to cover an emergency, fund your child’s education, or simply get your retirement money when you turn 60 years of age. Knowing how and when you can withdraw helps you plan better for your financial needs.
NPS Withdrawal Options
NPS gives you the flexibility to withdraw your money. Here are the two main options:
NPS Partial Withdrawal
You can withdraw part of your money before retirement, but only for certain reasons like education, marriage, medical emergencies, or buying/building a house.
Complete Withdrawal at Retirement
When you retire (at the age of 60 years), you can take out the 60% amount you have saved, and the remaining 40% is for annuity. Usually, this is a mix of a lump sum payment and buying an annuity (a regular income plan for your retirement).
Types of NPS Withdrawals
Partial Withdrawals (Tier I)
You can take out a part of your savings only after 3 full financial years in NPS, but only for specific purposes like education, marriage, medical needs, or house purchase. This partial withdrawal is allowed up to 3 times and is limited to 25% of your NPS contribution.
Premature Withdrawal
If you want to exit NPS before the age of 60 years, you can withdraw up to 20% of your total savings as a lump sum, but the rest must be used to buy an annuity. This is allowed only if you’ve been an NPS subscriber for at least 10 full financial years.
Withdrawal After Maturity
When you turn 60 years old, you can withdraw up to 60% of your total corpus as a lump sum, tax-free. The remaining 40% must be used to buy an annuity, which gives you a steady income after retirement.
Withdrawal in Case of Subscriber’s Death
If the subscriber passes away, the nominee or family can withdraw the entire amount from the NPS account without any annuity purchase.
NPS Withdrawal Rules by Subscriber Type
NPS withdrawal rules vary depending on whether you are a corporate employee or a government employee.
NPS Withdrawal Rules For Corporate Sector Employees
On Retirement (60 years):
* Withdraw up to 60% of corpus as a lump sum (tax-free).
* Use the remaining 40% to buy an annuity for regular pension income.
* Full withdrawal allowed if corpus is less than ₹5 lakh.
On Early Retirement:
* Allowed after 10 full financial years of subscription.
* Can withdraw 20% lump sum, rest in annuity.
* Full withdrawal allowed if corpus is less than ₹2.5 lakh.
On Death:
Nominees can withdraw the full corpus without buying an annuity.
NPS Withdrawal Rules and process for Government Employees
On Retirement:
* Same rules as corporate employees: 60% lump sum and 40% annuity.
* Full withdrawal allowed if corpus is less than ₹5 lakh.
On Early Retirement:
* Withdrawal allowed with 20% lump sum withdrawal and 80% towards annuity.
* Full withdrawal allowed if corpus is less than ₹2.5 lakh.
On Death:
Nominees can withdraw the entire corpus without annuity.
NPS Withdrawal Process Online & Offline
Online Process via ICICI Bank Digital Channels
You can also use the iMobile app from ICICI Bank or our internet banking services to do this.
Through ICICI Bank Net Banking
Log in to the ICICI Bank Net Banking account with your username and password.
Go to ‘Investment and Insurance’ > Select ‘National Pension System’ (NPS).
Choose the option to withdraw and submit the request.
Through the iMobile App
Log in to the iMobile app with your username and password.
Go to ‘Invest’ > Select NPS.
Choose the option to withdraw and submit the request.
Online Process via NSDL
- Log in to the official eNPS NSDL portal using your PRAN number and password.
- Go to the "Transact Online" section and select "Withdrawal."
- Choose your withdrawal type from the list of partial, premature, or at retirement.
- Fill in the details and download the withdrawal form.
- Upload the form along with KYC documents (like Aadhaar and PAN).
- Submit the request online.
Offline Process
- You need to download the withdrawal form from the NSDL portal or collect it from your nearest nodal office.
- Fill the form and attach KYC documents.
- Submit it in person at the POP-SP or nodal office.
Tax Implications on NPS Withdrawal
How your NPS withdrawal is taxed depends on whether you take a lump sum or buy an annuity:
When you withdraw at maturity or retirement, up to 60% of the corpus is tax-free.
If you go for a premature withdrawal, then up to 20% corpus can be withdrawn tax -free.
Partial withdrawals for approved purposes are also tax-free.
Withdrawal Type | Tax Treatment |
|---|---|
Lump Sum at Retirement | Up to 60% tax-free |
Annuity Income | Taxable as per the income tax slab |
Partial Withdrawal | Up to 25% of the subscriber's own contributions are tax-free if used for permitted purposes |
Premature Withdrawal | Up to 20% corpus is tax-free. |
FAQs
How much can I withdraw from NPS before 60?
You can withdraw up to 20% of your corpus as a lump sum before 60 years of age, but only if you have been in NPS for at least 10 full financial years. The rest must be used to buy an annuity.
What documents are needed for NPS withdrawal?
NPS Withdrawal Form
Proof of Identity and Address as indicated in the Withdrawal form
Proof of Bank Account
Copy of PRAN card
Can I make an NPS withdrawal online?
Yes, you can withdraw your NPS money online via the official eNPS NSDL portal or through ICICI Bank’s Net Banking, the iMobile app.
How long does an NPS withdrawal take?
NPS withdrawals may take about 10 working days from the date of application, whether done online or offline.
Conclusion
NPS Withdrawal rules are designed to balance your need for funds with the long-term goal of securing your retirement. Whether you need partial money for emergencies or want to withdraw at retirement, understanding the options and rules will help you make better decisions. With a simple process available both online and offline, and the added tax benefits, NPS stands out as an attractive long-term savings plan.