The National Pension System (NPS) is a popular scheme for those who want a secure income after retirement. But did you know that you can withdraw money from your NPS account even before reaching 60 years of age? While this scheme aims to ensure long-term savings, it also provides options for early withdrawals during emergencies. Let’s break down the rules for partial withdrawals and premature exits.
Rules for Partial Withdrawal from NPS
After contributing to your NPS account for at least 3 years, you become eligible for partial withdrawals. However, there are some important rules you need to follow:
- Withdrawal Limit: You can withdraw only up to 25% of your own contribution. This doesn’t include any investment returns or contributions made by your employer.
- Withdrawal Purposes: You can withdraw for specific reasons such as buying a house, treating serious health conditions, covering disability expenses, funding children’s education or marriage, or even starting a new business.
- Number of Withdrawals Allowed: You can make up to three partial withdrawals during the entire investment period.
Partial withdrawal is designed to help you during emergencies while ensuring the majority of your funds remain intact for retirement.
Rules for Premature Exit from NPS
Although NPS accounts are generally meant to mature when you turn 60, there’s an option to exit the scheme early if necessary. Here’s what you should know about premature exit:
- Minimum Investment Period: You can exit the scheme only after completing 5 years of investment. However, if you started your NPS account after turning 60, you can exit after just 3 years.
- Withdrawal Limit: Upon exiting early, you are allowed to withdraw only 20% of your accumulated funds as a lump sum.
- Mandatory Annuity Purchase: The remaining 80% of your funds must be used to purchase an annuity, which ensures you receive a regular pension for life.
- Exception for Small Funds: If your total NPS balance is less than Rs 2.5 lakh, you are allowed to withdraw the entire amount in one go, without the need to buy an annuity.
This system ensures that even if you exit early, a significant portion of your funds will be secured for future pension needs.
