The National Pension System (NPS), a government pension scheme, was introduced on January 1, 2004 by the central government. The scheme is developed by the government of India to offer old-age security. The Scheme is overseen by the Pension Fund Regulatory and Development Authority (PFRDA).

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The scheme is classified into two categories broadly- government sector and private sector.

Any individual citizen of India - both resident and non-resident in the age bracket of 18-70 years as of the date of filing of NPS application, can take the benefit of NPS.

Now, let's know about pre-mature exit and pension rules for NPS.

What is pre-mature exit under NPS?

When a subscriber exits before completing three years under NPS or exits before 60 years or the age of superannuation is called pre-mature exit. 

Limit for withdrawal of entire corpus as a lump sum

You can withdraw Rs 2.5 lakh on the date of initiation of the pre-mature exit request.

In the non-governmental sector, if the corpus at the time of the start of the pre-mature exit request is equal to or less than Rs 2.50 lakh, the full corpus can be withdrawn as a lump amount.

If the corpus on the date of start of the pre-mature exit request is larger than Rs 2.5 lakh, at least 80 per cent of the corpus can be used to purchase an annuity giving periodical pension to the subscriber. The remaining funds, after being used to purchase an annuity, are paid to the subscriber in one single amount.

In case of pre-mature exit, will my pension start immediately?

Yes, in case of pre-mature exit, pension starts immediately, if the subscriber fulfills the age and corpus criteria for purchasing an annuity (depending upon the choice of ASP and annuity scheme of the respective annuity service provider).

NPS: Rules for partial withdrawal

Tier I partial withdrawal rules
NPS subscribers may withdraw a portion of their corpus from the Tier I corpus in specific conditions, such as serious disease treatment, higher education, or child marriage, among others. However, the criteria for partial NPS withdrawal require that the investor have invested in NPS for at least three years. In addition, an NPS tier 1 account allows an investor to withdraw up to 25 per cent of their corpus contribution. An investor can request partial NPS premature withdrawal up to three times throughout his or her investment, with a minimum of five years between each withdrawal. All partial withdrawals are tax-free.

Tier II partial withdrawal rules
Withdrawals from NPS tier II accounts are not restricted because they are voluntary. An investor or subscriber can remove any amount from tier II accounts for whatever reason they want. In this regard, they work similarly to savings bank accounts. While there are no withdrawal restrictions, it is important to remember that a Tier II account does not receive any of the tax benefits of an NPS Tier I account.