On 21st Dec. 2018 , the Pension Fund Regulatory and Development Authority (PFRDA) has changed the norms for withdrawal of National Pension System (NPS) subscribers. Here are the details.

NPS Withdrawal Rules 2019 (partial)

Earlier partial withdrawals from NPS Tier 1 was possible only after the account was ten years old. In a welcome move, this has been reduce to three years!

However, this is applicable only from August, 10th 2017 and not to older subscribers. This is unfortunate and must be allowed.

Also, with effect from the same date, that is, 10th August 2017, the minimum gap of 5 years between two partial withdrawals has also been removed. This also is another welcome move.

However, it should be noted that, NPS subscribers can only partially withdraw thrice for the reasons given below.

Also there is an additional important limitation. Each withdrawal cannot exceed twenty-five percent of the contributions made by the subscriber and excluding contributions made by the employer. This continues to be a serious limitation as if the need is dire, then the employee cannot fall back on NPS.

Eligible reasons for partial withdrawal from NPS

1. higher education and marriage of children
2. purchase or construction of a residential house or flat individually or jointly with spouse. This is allowed only if subscriber does not have an previously purchased property with the exception of ancestral property.
3. treatment of specified illnesses of subscriber, spouse, children, dependent parents
4. skill development/re-skilling or for any other self-development activities.
5. Establishment of own venture or any start-ups.
6. medical & incidental expenses due to disability or incapacitation.

Illness eligible for partial withdrawal in NPS

(a)Cancer;

(b)Kidney Failure (End Stage Renal Failure);

(c)Primary Pulmonary Arterial Hypertension;

(d)Multiple Sclerosis;

(e)Major Organ Transplant

(f)Coronary Artery Bypass Graft;

(g)Aorta Graft Surgery;

(h)Heart Valve Surgery;

(i)Stroke;

(j)Myocardial Infarction;

(k)Coma;

(l)Total blindness;

(m)Paralysis;

(n)Accident of serious/ life threatening nature.

(o)Any other critical illness of a life threatening nature as allowed

Summary

The revised NPS withdrawal rules are welcome. However for some situations like critical illness, accident etc. the 25% withdrawal limit should be removed. Nonetheless, these changes are a step in the right direction.

NPS Resources

Check out our previous posts on the NPS

How to make online contributions to NPS Tier I and Tier II accounts

NPS has EEE (tax free) Status! Here is why you should still not invest

Do Not Invest Rs. 50,000 in NPS for additional tax saving benefit!