Did you know: there is more than one way to make an NPS withdrawal?
The NPS (National Pension System) is a popular Indian retirement savings scheme. Earlier, NPS only allowed limited access to funds before retirement, through partial withdrawals.
But now, under the new PFRDA withdrawal rules, 2025, subscribers have greater flexibility. They can now make:
- More partial withdrawals
- Easier exits with higher lump sums
- Stay invested up to a higher age limit
Thus, investors can effectively manage their short-term needs as well as long-term retirement goals.
Why the 4 Partial Withdrawals Rule Changes Everything
Earlier, in NPS investors were allowed to make only up to three partial withdrawals. These withdrawals were limited to 25% of own contributions and meant for specific purposes. Now, under the revised PFRDA rules, subscribers can make four partial withdrawals before age 60, from their Tier I account. These withdrawals were subject to certain conditions, such as:
- Completing at least three years in NPS to become eligible
- Withdrawal of only up to 25% of your own contributions each time (excluding employer contribution).
- Keeping a minimum gap of 4 years, mandatorily between two withdrawals
- Withdrawing only for specific purposes
These rules on partial withdrawals improved liquidity and ensured that NPS continues to serve its main purpose of retirement security.
When Can You Tap into Your NPS Corpus?
In NPS investors can access their pension corpus at different stages, depending on their age and investment tenure.
1. Before retirement
You may withdraw a portion of your savings after completing three years in NPS. Under the updated rules, you can use this facility up to four times. However, there should be a minimum four-year gap between withdrawals, helping you manage important financial needs without disturbing your long-term plan.
2. At retirement
On reaching 60 years or at superannuation, you can exit NPS and withdraw a large part of your accumulated corpus. You also have the option to receive the amount gradually through structured withdrawal methods.
3. Early exit option
Non-government subscribers who complete the minimum required investment period can opt for an early exit and access their funds as per prescribed guidelines.
4. Stay invested longer
The upper age limit to remain invested has been extended from 70 to 85 years for non-government subscribers. This gives you greater freedom to plan withdrawals at your own pace even after retirement.
Limits, Eligibility, and Tax‑Free Benefits
The new NPS withdrawal rules have facilitated new norms on limit eligibility and tax-saving.
Partial Withdrawal Limits
For every partial withdrawal, you can take out up to 25% of your own contributions (employer contributions are not included). Thus, with the help of the new NPS partial withdrawal norms, you manage your needs while keeping enough savings for retirement.
Eligibility Conditions
To be eligible for a partial withdrawal, the subscriber need to:
- Have completed a minimum of three years in the NPS.
- Use the withdrawn funds only for specified purposes, such as:
- Children’s higher education or marriage.
- Medical treatment or critical illness.
- Purchase or construction of residential property.
- Starting or expanding a business.
Tax Benefits
Under existing tax provisions, NPS contributions qualify for deductions under Section 80CCD(1B), and lump sum withdrawals up to 60% have been historically tax‑free. The latest regulations enabling up to an 80% lump-sum withdrawal may not automatically translate into tax‑free status without corresponding changes to the Income Tax Act.
Subscribers should consult updated tax notifications or financial advisors for clarity on how the additional 20% will be treated for tax purposes.
The New 80 Per Cent Lump Sum and Exit Flexibility
The 2025 amendments have made NPS exits more flexible for non-government subscribers.
Up to 80% withdrawal
At the time of exit (on retirement or eligible early exit), you can withdraw up to 80% of your total corpus as a lump sum or through phased withdrawals.
Reduced annuity requirement
You need to use at least 20% of the corpus to buy an annuity to receive a regular pension. Earlier, this requirement was 40%.
Full withdrawal for small corpus
If your total NPS savings are up to ₹8 lakh, you may withdraw 100% of the amount without purchasing an annuity, subject to regulatory guidelines.
Applicable non-government subscribers’ investment options include the “All Citizen Model” and a “Corporate NPS Mode;.”
Conclusion
The enhanced NPS liquidity framework has brought a meaningful evolution in India’s retirement planning landscape. The partial withdrawal opportunities are increased from three to four. This has led to enhanced exit options and reduced compulsory annuity requirements. The amended rules offer subscribers greater control over their retirement savings without undermining the pension objective.
However, subscribers need to approach these options strategically. Partial withdrawals should be underpinned by genuine needs and aligned with long‑term retirement goals. The potential tax implications of higher withdrawal percentages also call for careful consideration.
This can help financial planning professionals navigate these decisions within the context of individual retirement objectives.
Frequently Asked Questions
Q1: How many times can I now partially withdraw from NPS?
Under the revised rules, you can make four partial withdrawals before age 60, each separated by at least four years and limited to 25% of your own contributions.
Q2: When is the first partial withdrawal allowed?
You are eligible to apply for your first partial withdrawal after completing three years of subscription.
Q3: Can I withdraw funds for any reason?
No. Partial withdrawals are permitted only for specified purposes such as education, marriage, property purchase, medical treatment, or a business venture.
Q4: Is the additional 20% lump sum at retirement tax‑free?
Up to 80% of the retirement corpus is now tax-free as a lump sum (increased from 60%), while annuity from the remaining minimum 20% is taxable as per income tax slab.
Q5: What happens if my total corpus is below a specified threshold?
If your accumulated pension wealth is below certain limits (for example, ₹ 8 lakh in the latest guidelines), you may be able to withdraw the entire corpus at exit, subject to conditions.
