The National Pension System (NPS) is a small savings scheme that matures at retirement or when the subscriber reaches the age of 60. At maturity, the member can withdraw up to 60 per cent of the fund in a lump sum or systematically until the age of 75, and they must invest the rest 40 per cent in an annuity plan. NPS offers two types of accounts: Tier I and Tier II. However, the withdrawal rules apply only to Tier I account, subject to certain conditions.

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Who Can Open An NPS Tier I Account?

Anyone between the ages of 18 and 70 years can open an NPS Tier I account. NPS contributions up to Rs 1.5 lakh in a financial year are eligible for tax deductions under Section 80C of the Income-tax Act, 1961, under the old regime. One can contribute a minimum of Rs 500 at the time of account opening. However, the subscriber must maintain a minimum balance of Rs 1,000 annually, to keep the account active. Additionally, in certain circumstance, the members are allowed to withdraw funds from the NPS tier I account before maturity.

Here are some withdrawal rules for the NPS account.

For Partial Withdrawals From NPS Tier I Account:

Subscriber should be enrolled in NPS for a minimum of three years. One can withdraw only up to 25 per cent of the fund in a partial withdrawal, which is allowed only three times before maturity. The member can withdraw funds for children’s higher education, marriage, house purchase or construction, owned individually or jointly with their spouses, medical treatment for diseases like cancer, and organ transplants, etc., for self, spouse, children or dependent parents.

The Pension Fund Regulatory Development Authority (PFRDA) also allows partial withdrawals for up-skilling or self-development or starting a start-up. Unlike the NPS Tier 1 account, NPS Tier II accountholders can withdraw the funds anytime, partially or fully, subject to income tax.

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How To Make A Partial Withdrawal From NPS Tier I Account?

For a partial withdrawal, the subscriber must submit a withdrawal request and a self-declaration mentioning the purpose to the point of presence (POP) or the nodal office, which will verify the request and send it to the central record-keeping agency (CRA) to process it.

The subscribers can apply for partial withdrawals online on the CRA’s website. People who are sick can submit the request via a family member. In that case, the CRA will verify the beneficiary’s bank details using the ‘penny drop method’ and other information before processing the request. Once the details are verified, funds are transferred directly to the subscriber’s bank account.