In 2004, the government of India launched the National Pension System or the NPS. It is a long-term investment plan and comes with a set number of rules for withdrawal. Here we will discuss the NPS withdrawal rules for govt employees and all other beneficiaries.
The NPS is a voluntary long-term investment scheme that is available to employees from the public, private, and unorganized sectors. All employees between the ages of 18 and 65 can invest in this scheme while they are employed.
It is regulated by the PFRDA or the Pension Fund Regulatory and Development Authority. The National Pension System Trust or the NPST owns all assets under the NPS and they are invested in a mix of government securities, fixed income, and equity.
NPS allows two types of accounts, namely Tier-1 and Tier-2. The Tier-1 accounts have an extended lock-in period that offers tax benefits, whereas the Tier-2 accounts have no lock-in period, are voluntary, and offer no tax benefits.
The NPS withdrawal rules for govt employees are a little different from those of the private sector employees. The other difference lies in the type of account opened by the beneficiary.
The Tier-2 accounts have no withdrawal limits, but they don’t have any tax benefits either. On the other hand, Tier-1 accounts have various rules pertaining to scenarios of partial withdrawal, as well as withdrawal before and after maturity.
NPS allows you to partially withdraw your funds in cases like the education of the account holder’s children, marriage expenses, house construction, or medical emergencies. The NPS withdrawal rules regarding partial withdrawal are mentioned below.
If you have been an NPS subscriber for 3 years from the date of your joining the scheme, you can make a partial withdrawal
You can make a maximum of 3 withdrawals over the entire tenure of your scheme
You can only withdraw 25% of the contributions that you make between any two partial withdrawals
If you are searching for ‘NPS withdrawal rules in Hindi’ or NPS withdrawal rules in general, there are subtle differences depending on which sector you work in. The NPS scheme reaches maturity when you retire, so these same rules apply for withdrawal on maturity.
The following rules need to be followed if you are a government employee and want to withdraw funds from your NPS account after your retirement -
You will need to invest at least 40% of the amount in some annuity plan
The remaining balance amount can be withdrawn as a lumpsum
In case the accumulated pension is less than Rs.5 Lakh, you can withdraw the total amount in one go
You can postpone the withdrawal of the lumpsum amount till you attain 70 years of age
An individual should invest a minimum of 40% of the amount in annuity, with an option to withdraw the balance in lumpsum
The lump sum withdrawal can be postponed till a subscriber attains the age of 70 years
In the event of the accumulated pension being less than or equal to Rs.5 lakh, an individual can choose to withdraw the complete amount
You can take a voluntary retirement before your NPS account reaches maturity or you retire at the age of 60. The following are the rules depending on the sector you work in.
Here are the NPS withdrawal rules for government employees in case they take voluntary retirement -
You will need to invest at least 80% of the amount in some annuity plan
The remaining amount that is accumulated will be paid to the account holder
In case the amount is less than Rs.2.5 Lakh, you can withdraw the total amount in one go
The following are the rules in case you are a private sector employee -
You must have maintained the account for at least 10 years
You will need to invest at least 80% of the amount in some annuity plan
In case the amount is less than Rs.2.5 Lakh, you can withdraw the total amount in one go
In the unfortunate event of the death of the account holder, NPS has rules in order to manage the accumulated funds. The rules are the same for both government and private sector employees.
If the account holder passes away before reaching retirement age, the nominee or legal heir can choose to withdraw the entire accumulated amount.
The National Pension Scheme is a great way to save money for your retirement. There are, however, certain rules regarding withdrawals. You can make partial withdrawals, as well as withdrawals before maturity or retirement.
In case of the death of the subscriber, the nominee or the legal heir can withdraw the accumulated money. But NPS is not a tax-free investment plan, when you receive your annuity, you will have to pay taxes according to your tax slab.
Apart from such retirement plans, if you are in need of urgent funds, you can always opt for instant personal loans from moneyview. If you are between the ages of 21 and 57, you can get loans up to Rs.10 Lakh with minimal documentation. To know more, please visit our website or download the moneyview app.
There is a three year lock-in period in the NPS, after which you can withdraw money partially for a maximum of three times during your tenure.
If you quit your job and your next employer has subscribed to NPS, your account will keep growing as usual. But you also have the option to withdraw the amount under a pre-mature withdrawal request, if your new employer does not subscribe to NPS.
When you invest the required percentage of the money into an annuity and withdraw the rest, you will not have to pay any taxes. But as you start receiving your annuity money, you will have to pay taxes based on your tax-slab.
You need to reach the age of 60 to be eligible for NPS maturity facilities.
If you withdraw your money after a voluntary retirement, you can withdraw up to 20% of the amount. In case you withdraw the money after maturity, you can withdraw up to 40%. The rest of the amount needs to be used for annuity.
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