Introduction
If you’re investing in the National Pension System (NPS), you already know it’s one of the safest ways to build a big retirement fund. But when it comes to withdrawals, things can feel a bit confusing.
Many people are unsure about how much they can withdraw, when they can withdraw, or what happens if they need money before retirement.
So in this guide, let’s walk through everything about NPS withdrawals in a simple, friendly way — no heavy terms, no complicated rules, just the information you actually need.
What Exactly Is NPS?
NPS is a government-backed retirement plan where you invest a little every year, and the money grows over time. When you retire, you get a part of your savings as a lump sum and the rest as monthly pension.
There are two types of accounts:
- Tier I – the main account with tax benefits
- Tier II – an optional savings account with no strict rules
Your returns depend on the funds you choose and how long you invest.
Types of NPS Withdrawals (Let’s Keep This Simple)
1. Withdrawal at Retirement (Age 60)
This is the moment you’ve been waiting for — your NPS money finally comes back to you.
- You can take 60% of your total money as a lump sum. This amount is completely tax-free.
- The remaining 40% must go into an annuity, which gives you a monthly pension.
- If your total savings are ₹5 lakh or less, you can withdraw everything without buying an annuity.
This setup makes sure you get cash in hand and also a steady monthly income.
2. Premature Exit (Before Age 60)
If you want to exit NPS early, here’s what you need to know:
- You must complete at least 10 years in NPS.
- Only 20% of your money can be taken as cash.
- The other 80% must be used to buy an annuity.
- If the total savings are ₹2.5 lakh or less, you may withdraw the full amount.
This rule ensures people don’t drain their retirement money too early.
3. Partial Withdrawal (For Special Needs)
Sometimes life brings emergencies or important family events — for those moments, NPS allows partial withdrawals.
✔ Allowed Reasons
- Education (for you or your kids)
- Marriage of your children or yourself
- Medical emergencies for family
- Buying or constructing a house
✔ Rules You Should Know
- You can take up to 25% of your own contributions (excluding employer share).
- You must complete three years in NPS.
- You can use this option three times in your whole NPS journey.
- These withdrawals are tax-free if used for approved reasons.
NPS Tier I Withdrawal Rules – The Main Account
At Retirement
At age 60, you choose how much you want as a lump sum and how much goes into the annuity. If your total amount is small (up to ₹5 lakh), you can just withdraw everything and skip the annuity.
Premature Exit
Leaving early? You’ll still need to keep most of the money in an annuity. This protects your long-term retirement income.
Partial Withdrawal
NPS allows you to tap into your own contributions but only for valid purposes. This way, you don’t disturb your full retirement plan.
Non-Retirement Withdrawals (Special Situations)
Sometimes life takes unexpected turns. In cases like disability, serious illness, or the subscriber’s death, NPS allows complete withdrawal.
- If the subscriber passes away, the nominee gets the full amount.
- No annuity is needed in such cases.
- For severe illnesses or disability, the subscriber can also withdraw the whole amount.
This gives financial support when families need it the most.
How to Withdraw Money From NPS (Super Simple Steps)
1. Online Withdrawal
- Go to your CRA portal (Protean, KFintech, or CAMS).
- Log in with your PRAN and password.
- Choose “Withdrawal” under “Transact Online.”
- Pick your withdrawal type (retirement, premature, or partial).
- Upload Aadhaar, PAN, and bank details.
- Verify through OTP and eSign.
- Your POP checks everything, and the money goes to your bank in a few days.
It usually takes about 10 working days.
2. Offline Withdrawal
Prefer doing things on paper? No problem.
- Visit your nearest POP or nodal office.
- Fill the correct withdrawal form (based on your type of withdrawal).
- Submit your KYC documents.
- After verification, money is credited to your bank account.
Tier II account withdrawals only need Form UOS-S12.
Things You MUST Check Before Withdrawing
Keep Nominee Details Updated
This is super important. If anything happens, your family can claim the money easily.
Plan How Much Money You Really Need
Don’t withdraw everything at once unless you truly need it. More money left in NPS = more years of growth = bigger retirement safety.
Choose the Right Annuity
Different companies offer different pension plans. Compare payouts, frequency, and return options before picking one.
Common Mistakes You Should Avoid
1. Not Checking Tax Rules
- 60% retirement withdrawal = tax-free
- Annuity income = taxable
- Tier II withdrawals = taxed like normal income
2. Wrong or Old Documents
Even a small mismatch in name or Aadhaar can delay your withdrawal. Double-check everything before submitting.
3. Withdrawing Without Thinking Long-Term
Taking too much money too early can hurt your retirement income. Plan smartly and keep a balance between cash in hand and pension flow.
Conclusion
NPS is one of the strongest retirement plans you can choose in India. Once you understand the withdrawal rules in simple terms, it becomes much easier to plan your money.
Whether you’re retiring, facing an emergency, or simply exploring options, knowing how withdrawals work will help you make confident and smart decisions. Just stay updated, keep your documents ready, and plan your withdrawals wisely — your future self will thank you!
NPS Withdrawal: Top Frequently Asked Questions
1. Is the 60% NPS withdrawal at retirement tax-free?
Yes, the 60% lump sum you withdraw at retirement is completely tax-free.
2. Do I have to buy an annuity with 40% of my NPS balance?
Yes, unless your total NPS corpus is ₹5 lakh or less at retirement.
3. Can I exit NPS before age 60?
Yes, after completing 10 years. However, only 20% can be withdrawn, and 80% must go into an annuity.
4. How many times can I make partial withdrawals?
You can withdraw up to 25% of your contributions three times during your entire NPS journey.
5. How long does NPS withdrawal take?
Online withdrawals usually take about 10 working days after verification.