NPS Withdrawal - Normal and Early Exit Rules

NPS Normal Exit and Early Exit

Exit from the National Pension System (NPS) closes the Tier I account and pays the corpus as a lump sum, an annuity or both. The split depends on the subscriber category, the corpus on the date of the request and the type of exit (normal, partial, early, etc.)

1. NPS Normal Exit

   A normal exit happens when the subscriber reaches the vesting point for the category. Government sector subscribers become eligible for normal exit at superannuation or retirement under the applicable service rules. Corporate sector subscribers may exercise normal exit at retirement or superannuation, or continue in NPS under the applicable rules. 

   Under the All Citizen Model, normal exit is generally available after 15 years of subscription or on attaining age 60, whichever comes first. Subscribers who join NPS after age 60 are not subject to the standard 15-year or age-60 vesting condition. Their exit is governed by the separate rules applicable to this category. Subscribers may also choose to remain in the NPS beyond the normal exit point. 

   The lump sum and annuity options depend on the corpus amount and subscriber category. Systematic Lump Sum Withdrawal (SLW) pays the eligible lump sum in instalments, while Systematic Unit Redemption (SUR) allows periodic redemption of pension scheme units.

   Withdrawal Limits for Different NPS Corpus

   Corpus on the date of exit request	Non government subscribers	Government sector subscribers
   Up to ₹8 lakh	100% as lump sum, through SLW or SUR, or another approved option. Alternatively, up to 80% as lump sum and at least 20% as annuity	100% as lump sum, through SLW or SUR, or another approved option. Alternatively, up to 60% as lump sum and at least 40% as annuity
   Above ₹8 lakh and up to ₹12 lakh	Up to ₹6 lakh as lump sum, with the balance through SUR for at least six years or an annuity. Alternatively, up to 80% as lump sum and at least 20% as annuity	Up to ₹6 lakh as lump sum, with the balance through SUR for at least six years or an annuity. Alternatively, up to 60% as lump sum and at least 40% as annuity
   Above ₹12 lakh	Up to 80% as lump sum and at least 20% as annuity	Up to 60% as lump sum and at least 40% as annuity

   
   

   Sample Corpus Amounts Showing Withdrawal Limits

   Corpus	Non government: maximum lump sum	Non government: minimum annuity	Government: maximum lump sum	Government: minimum annuity
   ₹20 lakh	₹16 lakh	₹4 lakh	₹12 lakh	₹8 lakh
   ₹30 lakh	₹24 lakh	₹6 lakh	₹18 lakh	₹12 lakh
   ₹50 lakh	₹40 lakh	₹10 lakh	₹30 lakh	₹20 lakh

   Government and non-government subscribers may defer eligible lump-sum withdrawal or annuity purchase at normal exit until age 85, subject to the applicable sector-specific rules. However, Government-sector subscribers who continue contributing to NPS after superannuation cannot separately defer these benefits during the continuation period. 

   The annuity must be purchased from an annuity service provider permitted under PFRDA regulations. If the subscriber dies, the nominee or legal heir receives the corpus under the settlement rules for the category. NPS death benefits differ between non government and government subscribers.

2. NPS Early Exit

   An early exit, also called NPS premature withdrawal, refers to a voluntary exit before qualifying for normal exit under the applicable regulations. For non-government subscribers, the five-year lock-in has been removed. However, subscribers who have completed at least 15 years of NPS subscription may qualify under a separate exit provision, even before reaching 60 years of age.

   Corpus-wise NPS Early Exit Limits

   Corpus on the date of exit request	Lump sum	Annuity
   ₹5 lakh or less	Up to 100%, or through SLW or SUR	Not required
   Above ₹5 lakh	Up to 20%	At least 80%

   The full-withdrawal threshold for premature exit is ₹5 lakh. On a ₹12 lakh corpus, the lump sum is capped at ₹2.4 lakh and at least ₹9.6 lakh must be used to purchase an annuity. On a ₹20 lakh corpus, the corresponding amounts are ₹4 lakh and ₹16 lakh. These limits apply to premature exit and not to every exit before age 60. Deferment is not allowed at early exit, and the annuity can start immediately.

   Eligible non-government subscribers who have completed at least 15 years of subscription may qualify under a separate exit provision, subject to different corpus thresholds and withdrawal conditions.

NPS Partial Withdrawal

Partial withdrawal gives limited access to the Tier I corpus while the account stays active and remains invested. It is available only for specified purposes. A self-declaration stating the purpose of the withdrawal is required; supporting documents to prove the purpose are generally not required. 

Overview of NPS Partial Withdrawal Rules

Partial withdrawal is allowed for the following purposes.

• Higher education of children
• Marriage of children
• Purchase or construction of a residential house or flat, where the subscriber does not already own a house, with ancestral property excepted. This is permitted once
• Medical treatment or hospitalisation of the subscriber, spouse, children or parents
• Settlement of a financial obligation obtained from a regulated financial institution against a lien or charge marked on the individual pension account, subject to applicable rules and guidelines
• Medical and incidental expenses arising from a disability or incapacitation suffered by the subscriber. 

A subscriber with ₹3 lakh in eligible contributions can withdraw up to ₹75,000 at the first partial withdrawal, subject to the applicable contribution-stream rules. Tier II withdrawals are generally not subject to Tier I partial-withdrawal limits, but the Tier II Tax Saver Scheme has a three-year lock-in. 

Normal, Early and Partial Withdrawal Compared

The table shows how the three withdrawal routes differ.

How to Withdraw From NPS

Exit and partial withdrawal requests are raised through the Central Recordkeeping Agency (CRA) system using the PRAN.

1. Online Process

   The online route suits subscribers whose KYC and bank details are already up to date in the CRA system. The steps are as follows.

   1. Confirm that KYC and bank details are current and that the required FATCA declaration or status is complete in the CRA records. 
   2. Log in to the CRA system with the PRAN and password.
   3. Select exit or partial withdrawal and state the purpose where applicable.
   4. Upload the PAN, identity proof, address proof, PRAN card or ePRAN copy and bank proof.
   5. Choose the annuity service provider and the annuity plan where the corpus requires an annuity.
   6. Authenticate the request with an OTP or eSign.
   7. The Point of Presence (POP) verifies and authorises the request for non government subscribers, and the Nodal Office does so for government subscribers. The eligible lump sum is then processed for payment and the annuity purchase is completed, where required.

2. Offline Process

   The offline route suits subscribers who prefer to submit physical forms through a POP or a Nodal Office. The steps are as follows.

   1. Collect the exit or partial withdrawal form from the POP or the CRA website.
   2. Fill in the name, date of birth, PRAN, PAN, address, bank details and nominee details.
   3. Along with that, attach the copies of PRAN card, PAN, ID proof, address proof, and a cancelled cheque or the first page of your bank passbook.
   4. If you want a normal or premature exit, you will have to provide the information regarding the annuity service provider along with the plan. If it’s a partial withdrawal, you will have to submit the declaration form with the stated purpose.
   5. Submit the form and all documents to the POP or Nodal Office.
   6. Your request will be processed after verification in the CRA system and the money will be released into your registered bank account.

Key Takeaways

NPS offers three withdrawal options: normal exit, early exit and partial withdrawal. Non-government subscribers can withdraw up to 80% as a lump sum, while government subscribers can withdraw up to 60% for a corpus above ₹12 lakh. Full withdrawal is allowed up to ₹8 lakh at standard normal exit, ₹12 lakh for subscribers joining after age 60, and ₹5 lakh at early exit. Partial withdrawals are capped at 25% of eligible contributions, subject to applicable rules. The NPS calculator can help estimate the final corpus and the likely annuity income.