In Part 1 of our guide, we explored the investment options and key features that make NPS a powerful retirement tool. Now, let’s address one of the most crucial aspects of your NPS journey: accessing your funds.
Understanding NPS withdrawals:
The rules for withdrawing from your NPS Tier I account are designed to serve its core purpose: retirement savings. As such, there are intentional safeguards in place to ensure your funds are primarily used for your long-term financial security, preventing immediate and unrestricted access. However, provisions do exist for accessing your funds under specific circumstances. The process and requirements vary significantly depending on whether you’re making a partial withdrawal, exiting prematurely, or withdrawing upon retirement. Understanding these rules is essential for effective financial planning.
To help you navigate these crucial moments, let’s explore each withdrawal scenario in detail:
1. How to Initiate a Partial Withdrawal
This option is available when you need to access a small portion of your funds for a specific, pre-defined financial need.
Eligibility and rules:
- You must have been an NPS subscriber for at least three years.
- The withdrawal amount cannot exceed 25% of your own contributions (excluding returns and employer contributions).
- You are allowed a maximum of three partial withdrawals in your entire NPS tenure, with a minimum five-year gap between each withdrawal.
- The withdrawal must be for a specific purpose, such as:
- Higher education or marriage of your children (including legally adopted children).
- Purchase or construction of a residential house or flat (not for already owned property).
- Treatment for specified critical illnesses for yourself, your spouse, children, or dependent parents.
- Meeting expenses for skill development, re-skilling, or for establishing your own venture/start-up.
How to withdraw online:
- Log in to your CRA (Central Recordkeeping Agency) Portal using your PRAN and password.
- Navigate to the “Partial Withdrawal” section, typically found under “Transact Online” or “Withdrawal.”
- Enter the desired amount and select your withdrawal purpose. The system will automatically show your eligible amount.
- Verify the request with a One-Time Password (OTP) sent to your registered mobile number.
- Submit your request. The funds are typically credited within a few working days.
How to withdraw offline:
- Download “Form 601 PW” from your CRA’s official website.
- Fill out the form completely and attach all required documents, including proof of identity, address, and bank details (e.g., a cancelled cheque or bank certificate).
- Submit these documents to your nearest Point of Presence (POP-SP), which can be a bank branch or other designated financial institution.
- The POP-SP will verify your submission and process your request.
2. How to Initiate a Pre-mature Exit
This is for subscribers who need to exit the scheme entirely before reaching the age of 60.
Eligibility and rules:
- You must have been an NPS subscriber for a minimum of five years.
- If your total accumulated corpus is ₹2.5 lakh or less, you can withdraw the entire amount as a lump sum.
- If your corpus is greater than ₹2.5 lakh, you must use at least 80% of your accumulated funds to purchase a mandatory annuity, which provides a regular pension. The remaining 20% can be withdrawn as a lump sum.
Online process:
- Log in to your CRA Portal using your PRAN and password.
- Navigate to the “Exit from NPS” or “Withdrawal” section and select “Premature Exit” or “Voluntary Exit (before 60/retirement).”
- Provide your bank account details and choose an Annuity Service Provider (ASP) and a specific annuity plan.
- Generate and enter an OTP for authentication, then submit your request.
- Upload all required documents as prompted. The CRA/POP-SP will process your request, and funds will be settled.
Offline process:
- Download the “Premature Exit Withdrawal Form” from your CRA’s website.
- In the form, specify the details of your chosen Annuity Service Provider (ASP) and annuity plan.
- Attach all necessary documents as mentioned in the form.
- Submit the filled form and documents to your nearest Point of Presence (POP-SP), which will verify your documents, submit your request, and assist with all further formalities.
3. How to Initiate a Normal Exit (on Retirement)
This is the standard withdrawal process when you reach the age of 60, allowing you to maximize your benefits and secure a regular income in retirement.
Eligibility and rules:
- This option is for subscribers who reach the age of 60 or superannuation.
- If your total accumulated corpus is ₹5 lakh or less, you can withdraw the entire amount as a lump sum.
- If your corpus is greater than ₹5 lakh, you can withdraw up to 60% of the corpus as a tax-free lump sum. The remaining 40% must be used to purchase an annuity to provide a regular, lifelong pension. You also have the option to defer your withdrawal (lump sum, annuity, or both) up to the age of 75.
Online process:
- Log in to your CRA Portal using your PRAN and password.
- Navigate to the “Exit from NPS” or “Withdrawal” section and select “Superannuation Exit” or “Exit on attaining 60 years.”
- Specify your chosen payout options: the lump sum withdrawal amount and your selection of an Annuity Service Provider (ASP) and a preferred annuity plan. If deferring, choose your deferment options.
- Verify the request with a One-Time Password (OTP) sent to your registered mobile number.
- Upload required documents as prompted. The CRA/POP-SP will process your request, and funds will be settled.
Offline process:
- Download the “Superannuation Exit Withdrawal Form” from your CRA’s official website.
- In the form, provide details of your bank account and your chosen Annuity Service Provider (ASP) and annuity plan.
- Attach all necessary documents as mentioned in the form.
- Submit the filled form and documents to your nearest Point of Presence (POP-SP). The POP-SP will verify your documents, submit your request, and assist with further formalities, including sending your annuity purchase details to the chosen ASP.
Your Financial Future, Simplified
Understanding the rules and processes of your NPS account is the first step toward smart retirement planning. With clarity on how to manage your investments and what to expect during withdrawals, you can take full control of your financial future.
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