NPS Partial Withdrawal Rules: The National Pension System (NPS) is a government-sponsored scheme designed to provide financial security during retirement. In this scheme, contributions are divided into two parts: 60 per cent of the accumulated corpus is available as a lump sum at retirement, and the remaining 40 per cent is used to purchase an annuity that generates a regular pension. The scheme is managed by the Pension Fund Regulatory and Development Authority (PFRDA). 

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But what if you need funds before retirement? Is partial withdrawal allowed under the NPS? Let's explore the rules.

Conditions for Partial Withdrawal

On January 12, 2024, PFRDA issued a circular outlining the rules for partial withdrawal from the NPS, which took effect on February 1, 2024. According to these rules, NPS account holders can withdraw up to 25 per cent of their contributions, excluding any employer contributions. Here are the circumstances under which partial withdrawal is permitted:

  • Higher Education: You can withdraw funds for your children's higher education.
  • Marriage: Up to 25 per cent of your contributions can be withdrawn for your children's marriage.
  • Home Purchase or Loan Repayment: Partial withdrawal is allowed for buying a house or repaying a home loan, provided neither you nor your spouse already own a house.
  • Medical Expenses: Funds can be withdrawn to cover hospitalization and treatment costs for serious illnesses or accidental disabilities.
  • Business or Skill Development: You may withdraw money to start a business, pursue a startup, or enroll in a skill development course.

Eligibility Requirements for Partial Withdrawal

To be eligible for partial withdrawal from your NPS account, the following conditions must be met:

  • Membership Duration: You must have been a member of the NPS for at least three years.
  • Withdrawal Limits: You can make a maximum of three partial withdrawals during your entire subscription period, with a minimum gap of five years between each withdrawal.
  • Withdrawal Cap: Only 25 per cent of your total contributions can be withdrawn.

How to Withdraw Money?

To make a partial withdrawal of up to 25 per cent of your NPS contributions:

1. Application Submission: Submit an application to any government nodal agency associated with the NPS.
2. Self-Declaration: Include a self-declaration specifying the purpose of the withdrawal.
3. Processing: The application will then be forwarded to the Central Recordkeeping Agency (CRA) for verification and processing.

If the subscriber is unable to apply due to illness, a family member or nominee can submit the request on their behalf.