New NPS Rules Let You Take Out More Money

The rules for taking money out of your National Pension System (NPS) have changed. Now, if your total savings are Rs 8 lakh or less, you can take it all out when you retire. This is more than the old limit of Rs 5 lakh. These changes help people have more access to their retirement money.
By Newsroom | Finance, India |

Recent changes to the National Pension System (NPS) withdrawal rules have increased the threshold for full corpus withdrawal, offering subscribers greater access to their retirement savings. These updates, enacted by the Pension Fund Regulatory and Development Authority (PFRDA), aim to provide more options for individuals at the point of retirement and in cases of premature exit. The modifications impact various subscriber categories, including government and non-government employees, and address different corpus sizes.

PFRDA Introduces New Withdrawal Norms

The Pension Fund Regulatory and Development Authority (PFRDA) has updated the rules governing withdrawals from the National Pension System (NPS). The amendments provide for an increased limit for complete withdrawal of the accumulated corpus, which now stands at Rs 8 lakh. This revision marks a significant shift from the previous threshold of Rs 5 lakh. These new regulations apply to all NPS subscribers, encompassing both government and non-government categories.

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NPS Update: Full withdrawal allowed up to Rs 8 lakh corpus — Key rules explained - 1

Key Provisions for Full Corpus Withdrawal

Under the amended rules, a subscriber can opt for a 100% lump-sum withdrawal of their NPS corpus upon reaching the age of 60 or later, provided the total accumulated amount does not exceed Rs 8 lakh. This applies to retirement or superannuation.

  • Previous Limit: The previous limit for full corpus withdrawal was Rs 5 lakh.

  • Current Limit: The enhanced limit for full corpus withdrawal is Rs 8 lakh.

  • Applicability: These revised norms are applicable to all NPS subscribers, regardless of their employment sector.

The updated regulations also detail provisions for situations outside of normal retirement.

NPS Update: Full withdrawal allowed up to Rs 8 lakh corpus — Key rules explained - 2

  • Premature Exit: For exits occurring before the age of 60, the permissible lump-sum withdrawal is up to Rs 5 lakh. A lock-in period of five years is generally in place for such exits, though exceptions may apply.

  • Death of Subscriber: In the unfortunate event of a subscriber's death at any age, the entire corpus can be paid to their legal heir, with no upper limit imposed on this withdrawal.

Nuances in Withdrawal Options Based on Corpus Size

The PFRDA's amendments introduce a tiered approach to withdrawal flexibility, particularly for subscribers with larger accumulated funds. The options available vary significantly based on the total NPS corpus.

Corpus Between Rs 8 Lakh and Rs 12 Lakh

For non-government subscribers whose NPS corpus falls between Rs 8 lakh and Rs 12 lakh, a structured approach is outlined.

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NPS Update: Full withdrawal allowed up to Rs 8 lakh corpus — Key rules explained - 3

  • These individuals can withdraw up to Rs 6 lakh as a lump sum.

  • The remaining portion of the corpus must be allocated towards purchasing an annuity or is subject to phased withdrawal, as per new structured payout options.

Corpus Exceeding Rs 12 Lakh

Subscribers with a total NPS corpus greater than Rs 12 lakh are subject to different requirements concerning the purchase of annuities.

  • A minimum of 20% of the corpus must be used to purchase an annuity.

  • Up to 80% of the corpus can be withdrawn as a lump sum.

  • However, it is noted that only 60% of this lump sum withdrawal is tax-exempt.

Differential Treatment for Government Subscribers

While many of the recent PFRDA changes aim for uniformity, some distinctions in exit rules persist, particularly for government employees enrolled in the NPS.

NPS Update: Full withdrawal allowed up to Rs 8 lakh corpus — Key rules explained - 4

  • Lock-in Period: For government employees covered under the NPS, the mandatory five-year lock-in period continues to apply for any form of exit.

  • Non-Government Subscribers: It appears that for non-government NPS subscribers, the mandatory five-year lock-in period may no longer be strictly enforced for all exit scenarios.

Unified Framework Across NPS Schemes

A notable aspect of the PFRDA's revisions is the move towards a more consistent application of exit and withdrawal provisions across all NPS schemes.

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  • Uniform Applicability: The revised exit and withdrawal provisions are intended to apply uniformly to every NPS account, including those managed under government, corporate, NPS-Lite, and Swavalamban schemes.

  • Individual Account Options: Subscribers can exercise their exit options independently for each NPS account they may hold, ensuring a consistent treatment of funds across different schemes.

Additional Flexibilities and Loan Provisions

Beyond expanded withdrawal rights, the PFRDA has introduced other measures to enhance liquidity and flexibility for NPS subscribers.

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Frequently Asked Questions

Q: How much money can I take out fully from NPS now?
You can take out your full savings if the total amount is Rs 8 lakh or less when you retire.
Q: What was the old limit for taking out all the money?
The old limit was Rs 5 lakh.
Q: Can I take out money early from NPS?
Yes, if you leave before age 60, you can take out up to Rs 5 lakh.
Q: What happens if I die before taking my money?
Your legal heirs can take out the entire amount, no matter how much it is.
Q: Are the rules the same for government workers?
Most rules are the same, but government workers still have a 5-year waiting time to take money out.