The NPS or National Pension System locks you in till the age of 60 which is its retirement age. If you exit the system before this age, you can only withdraw 20% of your corpus and the rest of it is mandatorily ‘annuitized’ meaning that it is converted to an annuity. An annuity is an annual fixed payment of money, typically for the rest of your life. In addition, both the 20% lump sum and the 80% annuity become taxable.
Now, PFRDA, the body which manages NPS, has issued a notification allowing subscribers to partially withdraw up to 25% of your contributions for the reasons specified below. Budget 2017 had made this withdrawal tax-free.
What you can withdraw for
- Higher education of children
- Marriage of children
- For the purchase or construction of a residential house or flat either in your own name or jointly with your spouse. However if you already own or jointly own a house or flat other than ancestral property, this will not be permitted.
- For the treatment of any of the illnesses mentioned below. The patient can be the subscriber, his spouse, children or dependent parents.
- Kidney Failure
- Preliminary Pulmonary Arterial Hypertension
- Multiple Sclerosis
- Major Organ Transplant
- Coronary Artery Bypass Graft
- Aorta Graft Surgery
- Heart Valve Surgery
- Myocardial Infarction
- Total Blindness
- Accident of serious/life-threatening nature
- Any other critical illness of a life-threatening nature specified by the PFRDA from time to time
However, there are three pre-conditions to this:
- You have been a subscriber of the NPS for at least three years
- The withdrawal is up to 25% of your contributions and not 25% of your corpus. In other words, you cannot withdraw the returns that your contributions have earned under this provision.
- You can only make up to three such withdrawals in your entire tenure with the NPS