Can We Withdraw Partial Amount From National Pension Scheme?

National Pension Scheme is a reliable government-backed plan. Any individual aged between 18 years and 60 years can open the National Pension Scheme Account. Regulated and administered by the Pension Fund Regulatory and Development Authority(PFRDA),

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As National Pension Scheme allows individuals to make systematic investments, liquidity is never an issue. An eNPS account can also be opened if you have Pan Card or Aadhar Card.

In this article, you will understand more about National Pension Scheme and also if you can make any partial withdrawals from a National Pension account.

Who Should Invest in NPS?

National Pension Scheme is best suited for individuals who are unable to decide their asset allocations or do not have time to manage their investment.

An NPS is a completely government-backed scheme and any person who wants to plan their early retirement and does not wish to take high risks should undoubtedly go for it.

A salaried person who wants to take the best advantage of 80C deductions should consider National Pension Scheme.

Can We Withdraw Partial Amounts From NPS Account?

The Pension Fund Regulatory and Development Authority (PFRDA) has made amendments to National Pension Scheme to make it more attractive. One such thing under this is the partial withdrawal of money from the NPS Account.

However, there are certain conditions to withdraw your money. Let us look at how can you withdraw money from an NPS account.

  1. Partial Withdrawal Under Tier-I

    Tier-I Account

    • Functions as a pension account
    • Withdrawn are subject to specific restrictions
    • The account can be opened with a minimum deposit of 500 rupees

    A subscriber can partially withdraw under Tier-I if,

    • The individual has subscribed for National Pension Scheme for at least 10 years
    • Maximum withdrawal of up to 25% excluding contribution made by the employer, if any, before exit
    • A maximum of 3 withdrawals are allowed during the tenure
    • A minimum gap of 5 years is required between 2 withdrawals
  2. Partial Withdrawal Under Tier-II

    Tier-II Account

    • Functions as voluntary account
    • Offers liquidity of funds through investments and withdrawals
    • Account can be opened with a minimum deposit of 250 rupees
    • Tier-I account needs to be active to open a Tier-II account

    A subscriber can partially withdraw under Tier-II if,

    • The individual has filled UOS-S12 successfully and submitted it to the associated POP-SP
    • Withdrawals permitted are unlimited
    • No other restrictions while withdrawing cash from the account
    • However, investments do not feature any kind of tax benefits under Section 80C
  3. Withdrawal Before And After Retirement Age

    1. If Withdrawn Before 60

      • Only 20% of the accumulated corpus to be received
      • Rest 80% must be compulsorily annuitized
    2. If 60 Years Or Older

      • 60% of accumulated corpus to be withdrawn
      • Rest 40% must be compulsorily annuitized

      National Pension Scheme will always be paid in Indian Rupees

Benefits Under National Pension Scheme

Let us have a look at some of the benefits under the National Pension Scheme

  1. Liquidity

    As National Pension Scheme allows individuals to make systematic investments, liquidity is never an issue. To enjoy liquidity benefits, the subscriber needs to have any of the below-mentioned accounts along with a unique Permanent Retirement Account Number (PRAN).

  2. Flexibility

    To attain flexibility of their own choice, NPS holders can choose from the following options

    1. Auto Choice

      • It is a default option available to subscribers
      • The asset is allocated automatically depending upon your age
      • You cannot decide the proportion of allocation under auto choice
    2. Active Choice

      • Where you decide asset allocation in
      • Equity
      • Corporate Bonds
      • Government Securities
      • Different percentages can be allocated in different classes
      • A maximum of 75% can be allocated towards Equity
      • Subscribers can switch investment options as well as the fund manager
  3. Tax Benefit

    Income Tax Act 1961

    Tax Benefits

    U/S 80CCD (1)

    Under Tier-I investments, tax is deductible within the total ceiling of 1.5 lakh

    U/S 80CCD 1(B)

    Allowed up to Rs.50,000 as deductions towards Tier-I contributions

    U/S 80CCD (2)

    Under Tier-I investments is eligible for deduction up to 14% for central government contributions and up to 10% for the rest

  4. Deposit Benefit

    Under National Pension Scheme,

    • Contribution can be made any time of the financial year
    • Amount deposit in account is flexible and can vary every year

NPS Calculator

National Pension Scheme calculator allows the subscriber to compute the provisional lump-sum and pension amount.

At the time of retirement based on the monthly contributions, a subscriber can expect:

  • The annuity purchased
  • The expected rate of returns on investments
  • The annuity
  1. Who Can Use NPS Calculator?

    As per National Pension Scheme rules, any individual aged between 18 years and 60 years can open the National Pension Scheme Account, and hence can use NPS Calculator.

  2. How To Use NPS Calculator?

    To use the National Pension Scheme calculator, you have to follow these simple steps:

    • Step 1: Enter the amount to be invested every month
    • Step 2: Enter your present age
    • Step 3: Use the slider to select the expected rate of return
    • Step 4: Get results within seconds

    Note that, National Pension Scheme calculator illustrates tentative pension amounts and does not guarantee exact numbers.

Difference Between Tier I And Tier II Account

Let us look at the table to understand Tier-I and Tier-II account of the National Pension Scheme better

National Pension Scheme

Tier I

Tier II

Eligibility

Any Indian citizen between 18 & 65 years of age

Members of Tier-I only

Lock-in Period

Till the age of 60 years

NIL

Minimum number of contributions per annum

1

Nil, not important to contribute every year

Minimum amount for account opening

Rs 500

Rs 1,000

Minimum subsequent contribution

Rs 500

Rs 250

Minimum amount contribution per annum

Rs. 6000

NIL

Fund management charge

Same as Tier-II

Same as Tier-I

Available asset classes

Same for both

Equity (E): Predominant investment in Equity market instruments. Maximum 75%

Corporate Debt (C): Scheme invests in Bonds issued by Public Sector Undertakings (PSUs), Public Financial Institutions (PFIs), Infrastructure Companies and Money Market Instruments

Government Securities (G): Scheme invests in Securities issued by Central Government, State Governments and Money Market Instruments

Alternative Investment Funds (A): In this asset class, investments are being made in instruments like CMBS, REITS, AIFs, etc.

Tax benefits

For Tier-I investments, tax is deductible within the total ceiling of 1.5 lakh under Section 80CCD (1)

No tax benefit

Allowed up to Rs.50,000 as deductions towards Tier-I contributions under 80CCD 1(B)

Taxation on withdrawal

At maturity, the entire corpus is tax-exempt

The entire corpus can be withdrawn and added to income and taxed as per the tax slab

This table gives you a wide idea as to how Tier-I and Tier-II account for National Pension Scheme works.

Eligibility Criteria

A person planning to retire should go for the NPS scheme. The following person can buy National Pension Scheme

  • Any India residing citizen can open the NPS account
  • The minimum age eligibility for opening the NPS account is 18 years whereas the maximum age limit is 65 years
  • The applicant should be KYC compliant
  • The applicant should not have any pre-existing NPS account

Summing It Up

National Pension Scheme is a reliable government-backed plan which creates a financial corpus for an individual even after retirement. With more amendments and improvisations being made by the government, this scheme is considered simple and easy than other pension schemes in the market.

Written By: PolicyBazaar - Updated: 20 October 2021
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