NPS Withdrawal and Exit Rules 2026 — When You Can Take Your Money Out

Normal Exit at Age 60 (Superannuation)

When you reach 60 (or your service retirement date for government employees), you can exit NPS with a lump sum and annuity: At least 40% of the NPS corpus must be used to purchase an annuity (monthly pension for life) from an PFRDA-empanelled insurer. The remaining 60% can be withdrawn as a tax-free lump sum. The annuity rate and amount depends on the insurer and the annuity plan chosen. You can also choose to annuitise more than 40% — some retirees annuitise 100% of the corpus for maximum monthly pension. If the total corpus is ₹5 lakh or less, you can withdraw 100% as lump sum without buying an annuity.

Premature Exit Before Age 60

If you want to exit NPS before reaching 60 (and have been a subscriber for at least 10 years): At least 80% of the corpus must be used to purchase an annuity. Only 20% can be withdrawn as lump sum. This is less favourable than normal exit — the 80% annuity requirement means less flexibility. Important exception: If the total corpus is ₹2.5 lakh or less, you can withdraw 100% as lump sum even before 60. This applies to subscribers who have not accumulated large balances.

Partial Withdrawal Rules

NPS allows partial withdrawal for specific purposes after a minimum 3 years of subscription: Education or marriage of children: Up to 25% of your own contribution (not the employer's contribution). Medical treatment: Specified critical illnesses (cancer, renal failure, cardiac surgery, etc.) for self, spouse, children, or dependent parents. Home purchase or construction: Up to 25% of own contribution. Disability: If more than 75% disabled, you can withdraw the full corpus as lump sum. Maximum 3 partial withdrawals allowed in the entire subscription period. Gap of at least 5 years between withdrawals.

NPS for Government Employees (Tier I — Mandatory)

Government employees (central and most state) who joined after 01 January 2004 are mandatorily covered under NPS. The contribution is 10% of (Basic + DA) from the employee, and 14% from the government employer. The higher 14% government contribution makes government NPS significantly more valuable than private sector NPS (where employer contributes 10%). Government NPS withdrawal rules are the same as above, but superannuation exit is linked to the retirement age of the service (typically 60 or 62 years). On death in service, the entire NPS corpus goes to the nominee.

What Happens to NPS When You Change Jobs

NPS is fully portable — your PRAN (Permanent Retirement Account Number) stays with you regardless of employer changes. When you change jobs: If new employer also contributes to NPS (central government to central government, or private sector to private sector), continue with the same PRAN. If you move from a sector where NPS is mandatory to self-employment or a company that doesn't offer NPS, your existing Tier I account remains active — you can continue voluntary contributions or let it grow. You cannot withdraw on job change — only the partial withdrawal rules above apply. The account only fully unlocks at 60.

Tax Treatment of NPS

NPS is one of the most tax-efficient instruments available. Contributions: Section 80CCD(1) — up to ₹1.5 lakh as part of Section 80C limit. Section 80CCD(1B) — additional ₹50,000 exclusively for NPS (over and above 80C). Section 80CCD(2) — employer contribution (up to 14% for central government, 10% for others) is fully deductible. Withdrawals: Lump sum withdrawal at 60 (up to 60% of corpus) is tax-free. Annuity payments received monthly are taxable as income. Partial withdrawals for specified purposes are tax-free.

Frequently Asked Questions