The Pension Fund Regulatory and Development Authority (PFRDA) has issued new guidelines limiting partial withdrawals from NPS accounts to just 25% of the subscriber’s total contribution. With effect from February 1, 2024, pension account holders can make withdrawals only for specified purposes and up to the prescribed limit.
As per the circular, NPS subscribers can make partial withdrawals in the following situations:
- Children’s higher education
- Marriage of children (including legally adopted children)
- Purchase/construction of residential house or flat (if subscriber has no existing residential property)
- Treatment of critical illnesses – cancer, kidney failure, heart transplant etc.
- Medical treatment and expenses arising out of disability or incapacitation
- Skill development or vocational training courses
- Setting up a new enterprise or startup
Key Rules Governing NPS Partial Withdrawals
- Subscribers should have completed at least 3 years in the NPS scheme
- Maximum withdrawal amount is capped at 25% of the subscriber’s total contribution
- Lifetime withdrawal limit is 3 times the contribution amount
- Employer’s contribution amount will be excluded from the withdrawal calculation
- Subscribers have to submit a self-declaration stating the purpose of withdrawal
How To Withdraw Funds From Your NPS Account
Step 1: Initiate withdrawal request through the Nodal Office or POP along with self-declaration
Step 2: CRA will verify your bank account using the penny drop method
Step 3: Once account is verified, withdrawal amount will be transferred within few days
Experts say this move aims to ensure long-term retirement corpus remains intact. Earlier, up to 75% of the corpus could be withdrawn, affecting retirement savings. The 25% cap will better secure subscribers’ old age financial needs.
However, partial access for specific goals still provides flexibility in case of medical or housing needs. The revised rules balance both aspects well.
PFRDA’s circular also clarified that withdrawals can be made maximum 3 times throughout the subscription period. So subscribers must plan their withdrawals judiciously.
With NPS gaining popularity as a tax-saving instrument also, experts advise calibrating withdrawals to not exhaust the 25% limit too soon.
Overall, the NPS partial withdrawal rules have been rationally revised, keeping subscribers’ best interests in mind. Limited but timely withdrawals for certain needs are still permitted without diluting one’s retirement savings much.
This provides pension account holders the benefits of accumulation, returns, liquidity and tax deductions. For securing your golden years, stay invested in NPS but be prudent with withdrawals.