NPS Partial Withdrawal Rules: Everything You Need to Know

The National Pension System (NPS) provides subscribers with the option to withdraw a portion of their retirement funds early, under certain conditions.

As per the most recent regulations from the National Pension System, starting on February 1, 2024, members will have the option to withdraw up to 25% of the funds they have personally put into their accounts once three years have passed since the account was established. The partial withdrawal should exclude the employer's contribution if any, and returns generated on the contributions.

The withdrawal is limited to specific purposes and subject to certain eligibility criteria, limit, and frequency.

What is Partial Withdrawal in NPS?

A partial withdrawal allows an NPS subscriber to withdraw a portion of their retirement savings for specific needs. As per Pension Fund Regulatory and Development Authority (PFRDA) regulations, subscribers can withdraw up to 25% of their own contributions, excluding returns and employer contributions if any.

NPS Partial Withdrawal Purposes

The allowed purposes for NPS partial withdrawal are:

1. Children's higher education fees (legally adopted too)
2. Children’s marriage expenses (legally adopted too)
3. Buying/constructing a residential house/flat
4. Treatment for specified critical illnesses 
5. Disability/incapacitation expenses
6. Support skill development and self-employment opportunities
7. To establish own venture or start-ups

NPS Partial Withdrawal Eligibility and Rules 

To make a partial withdrawal from NPS, the subscriber must:

1. Have 3+ years of account tenure
2. Subscribers can withdraw only up to 25% of their own contributions according to NPS partial withdrawal rules
3. Subscribers can make a maximum of 3 partial withdrawals in their NPS account lifetime as per PFRDA rules

For subsequent withdrawals after the first withdrawal of NPS Partial funds, only the incremental contributions after the last withdrawal date will be considered. 

How to Process an NPS partial withdrawal Request

A partial withdrawal in NPS can be requested by a Subscriber in the following manner:

1. Filling a withdrawal form with declaration of withdrawal purpose
2. Submitting the withdrawal request to the NPS recordkeeping agency via their Nodal Office
3. In case of critical illness, family members can submit withdrawal request on subscriber’s behalf

Conclusion

The NPS partial withdrawal provision allows subscribers to access a portion of their retirement savings under specific circumstances. It is important to be knowledgeable about the permitted reasons, requirements for eligibility, how often you can withdraw, and the potential tax consequences prior to making a partial withdrawal from your NPS account.

Here, you can access a comprehensive circular that provides additional details.