NPS Withdrawal: Can I withdraw 100% from NPS?

The NPS Calculator is a valuable resource for anyone looking to plan their retirement and make informed investment decisions. The question is, can you withdraw 100% from NPS? Discover the ins and outs of NPS withdrawals in this blog.

NPS stands for National Pension System, which is a voluntary retirement savings scheme launched by the Indian government in 2004. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and is designed to provide retirement income to the citizens of India. Learn more about NPS withdrawals in this blog.

The Vakilsearch NPS Calculator is a tool that helps investors calculate their estimated retirement corpus based on their investment amount, age, and other factors. The NPS calculator takes into account the expected returns on the investment and helps the investors plan their retirement savings accordingly. 

Get precise estimates with our advanced NPS calculator and secure your financial future.

Is it Possible to Withdraw 100% from NPS?

No, it is not possible to withdraw 100% of the accumulated corpus from the National Pension System (NPS) at once. The NPS is a retirement-focused investment product, which means that the money you invest in it is meant to provide you with a regular income after you retire.

However, there are certain situations where you can withdraw a portion of your accumulated corpus before retirement. These situations include:

• On Maturity: At the time of maturity (i.e., when the investor turns 60), the investor can withdraw up to 60% of the corpus as a lump sum, tax-free. The remaining 40% must be used to purchase an annuity that provides a regular income stream.
• In Case of Death: In the event of the investor’s death, the entire accumulated corpus can be withdrawn by the nominee or legal heirs.
• Exit Before Maturity: If the investor decides to exit the NPS before the age of 60, they can withdraw up to 20% of the accumulated corpus as a lump sum, tax-free. The remaining 80% must be used to purchase an annuity that provides a regular income stream.
• while it is possible to withdraw 100% of the accumulated savings from the NPS scheme, it is subject to specific conditions, primarily age-related. Participants should also consider the long-term benefits of the scheme and use the accumulated savings to provide a steady income during their retirement years.

Advantages of Vakilsearch NPS Calculator

Vakilsearch NPS Calculator is a tool that helps you estimate the potential returns on your National Pension System (NPS) investments. Some of the advantages of using the Vakilsearch NPS Calculator are:

• Quick and easy calculation: The Vakilsearch NPS Calculator is a simple and user-friendly tool that allows you to calculate the potential returns on your NPS investments in just a few clicks.
• Accurate estimates: The calculator uses advanced algorithms to provide accurate estimates of the potential returns on your NPS investments based on various parameters such as your age, investment amount, and expected returns.
• Helps in making informed investment decisions: By using the Vakilsearch NPS Calculator, you can get a clear idea of the potential returns on your NPS investments, which can help you make informed investment decisions and plan for your retirement better.
• Saves time and effort: By using the Vakilsearch NPS Calculator, you can save a lot of time and effort that would have otherwise been spent on manual calculations and research.

Features of Vakilsearch NPS Calculator

• It computes the projected pension amount by taking into account the contributor’s age, gender, and the amount of contribution.
• The calculator provides a range of investment options for the contributor to choose from and then calculates the anticipated pension amount based on the selected option.
• There is a provision to add a spouse as a joint contributor, and the calculator computes the estimated pension amount for both contributors.
• The contributor can choose a different pension starting age, and the calculator computes the projected pension amount based on that age.
• There is a feature that allows the contributor to include additional contributions towards the pension, and the calculator determines the impact on the expected pension amount.
• The calculator provides a detailed breakdown of the calculations and the assumptions used in computing the projected pension amount.
• The contributor can save and print the results of the pension calculation.

NPS Withdrawal Limit 

The NPS withdrawal limits differ for tier I and tier II accounts:

• Tier I:

There are various withdrawal rules for NPS Tier I accounts, including partial withdrawal, withdrawal before and after maturity. The key rules involve investing a minimum of 40% in annuity, with options for lump sum NPS withdrawal. Lump sum withdrawal can be deferred until the subscriber turns 70. In case the accumulated pension is less than Rs.5 lakh, complete withdrawal is permitted.

• Tier II:

Unlike tier I accounts, tier II accounts have no NPS withdrawal limits. While tier II accounts allow for more extensive investments, they don’t offer tax benefits under Section 80C.

Partial NPS Withdrawal Rules

1. A subscriber is permitted a maximum of three partial NPS withdrawals throughout the subscription period.
2. Withdrawals are limited to 25% of the subscriber’s contributions to the scheme.
3. To qualify for partial withdrawal, a subscriber must have been a scheme member for at least three years.
4. Partial withdrawals are sanctioned only under specific circumstances, such as funding education expenses for children, covering marriage costs, constructing a house, or addressing medical emergencies.

Premature NPS Withdrawal Rules

• NPS Tier I:

1. If the withdrawal amount is equal to or less than Rs.1 lakh, it can be taken as a lump sum without any tax implications.
2. For amounts exceeding Rs.1 lakh, a withdrawal of up to 20% is allowed, subject to income tax. The remaining 80% must be invested in annuities

• NPS Tier II:

For investors with a Tier-II account, there are no restrictions on withdrawals. Consequently, the NPS account functions similarly to a regular savings bank account. However, the NPS withdrawal process can be complex.

Difference Between EPF and NPS Withdrawal

Current Partial NPS Withdrawal Rules

The rules governing partial NPS withdrawals have been amended to allow contributors to withdraw up to 25% of their savings.

Amount Allowed for Partial NPS Withdrawal

Previously, NPS did not permit partial withdrawals, but the revised rules now enable contributors to withdraw a maximum of 25% of their principal amount. It’s important to note that the interest earned on the account cannot be withdrawn, allowing only a portion of the contributed amount to be withdrawn.

Time Period for Partial Withdrawal

Partial withdrawals can only be made after completing three years of contributions. Additionally, contributors are limited to three withdrawals, with a mandatory five-year gap between each partial withdrawal.

For instance, if a contributor deposits Rs.5,000 monthly for three years, they can make partial withdrawals after the completion of this three-year period. The withdrawal is limited to 25% of the total contribution made during this time. 

Subsequent partial withdrawals can only be made after five years from the date of the last partial withdrawal, in order to ensure a controlled and spaced-out withdrawal process.

Reasons for Partial NPS Withdrawal

Contributors are permitted to make partial withdrawals from their NPS accounts for specific emergencies. The following reasons are considered valid for partial withdrawals:

1. Child’s higher education
2. Child’s marriage
3. Treatment of Critical Illness for self, spouse, children, or dependent parents
4. Purchase or construction of the first house (not applicable if the subscriber already owns a residential property)
5. Fatal Accidents

NPS Exceptions for Five-Year Gap Rule

Exceptions to the five-year gap rule are allowed in cases of critical illnesses. Thirteen critical illnesses, accidents, and life-threatening ailments are accepted without adhering to the five-year gap rule. These include:

1. Stroke
2. Multiple Sclerosis
3. Cancer
4. Kidney Failure (End Stage Renal Failure)
5. Heart Valve Surgery
6. Primary Pulmonary Arterial Hypertension
7. Aorta Graft Surgery
8. Major Organ Transplant
9. Coronary Artery Bypass Graft
10. Paralysis
11. Coma
12. Total blindness
13. Myocardial Infarction
14. Accident of a serious or life-threatening nature
15. Any critical illness deemed life-threatening as per guidelines issued by the Authority.

Documents Required for NPS Withdrawal

For NPS withdrawal, the necessary documents include:

1. Valid identity proof (Aadhaar card, PAN card, Passport, etc.)
2. Valid address proof (electricity bill, ration card, etc.)
3. Original PAN card
4. Bank-related documents (letterhead, passbook, cancelled cheque, bank certificate with account holder details)
5. Undertaking and request form for complete withdrawal eligibility
6. Advance stamped receipt, signed and filled, with a revenue stamp of the concerned NPS subscriber.

How to Check the Status of NPS Withdrawal? 

To check the status of NPS withdrawal online:

1. Log into the NPS online portal (www.cra-nsdl.com).
2. Click on ‘Limited Access View’
3. Select ‘Exit Withdrawal Request.’
4. Choose ‘Withdrawal Request Status View.’
5. A new page will display the NPS withdrawal status.
6. Subscribers can also view their withdrawal status through Limited Access View on the CRA website’s home page, even before logging in.

Conclusion

In conclusion, it is not possible to withdraw 100% from NPS for the accumulated corpus from the National Pension System (NPS) at once. The NPS is a retirement-focused investment product that aims to provide a regular income after retirement. However, there are certain situations where a portion of the accumulated corpus can be withdrawn before retirement, such as on maturity, in case of death, or if the investor decides to exit before the age of 60.

Frequently Asked Questions:

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• Who Can Join National Pension Scheme?
• How to Open an NPS Account Online?