NPS Partial Withdrawal: Eligibility and Process

The National Pension System (NPS) is a government-regulated retirement savings scheme designed to secure financial stability post-retirement. One of its notable features is partial withdrawal, allowing subscribers to access a portion of their accumulated funds before retirement under certain conditions. Let’s learn about this feature in detail, along with the eligibility and the step-by-step procedure to avail of it.

Eligibility for NPS Partial Withdrawal

• Minimum Contribution Period: To be eligible for partial withdrawals, a subscriber must have completed a minimum tenure in the scheme. Generally, this period spans 3 years from the date of joining the NPS.
• Allowed Frequency: Partial withdrawals can be made only three times during the entire tenure of the NPS subscription. However, they must be spaced out and cannot be made within a certain timeframe between each withdrawal.
• Purpose of Withdrawal: Partial withdrawals are permitted for specific purposes, such as medical treatment, education, marriage, house construction, and self-development. The subscriber needs to provide documentation or evidence confirming the purpose for which the withdrawal is being made.
• Withdrawal Limit: The withdrawal amount is capped at a certain percentage of the individual's own contributions to the scheme. The limit is set at 25% of the total contributions made by the subscriber after completing three years in the scheme. This withdrawal is tax-exempted.
• Compliance and Regulatory Guidelines: Any partial withdrawal request must comply with the rules and regulations established by the PFRDA. The submission of necessary documents and adherence to prescribed procedures are crucial for compliance.

NPS Partial Withdrawal Process

Step 1: Determine Eligibility for Partial Withdrawal

Before initiating a partial withdrawal from NPS, ensure that you meet the eligibility criteria set by the NPS guidelines. Partial withdrawals are allowed for specific purposes, such as education, illness, marriage, house construction, or self-development, after a minimum specified period of continuous participation.

Step 2: Identify the Purpose of Withdrawal

Decide the reason for your partial withdrawal, as it needs to align with the predefined purposes outlined by the NPS guidelines. Draft a simple application mentioning the reason for partial withdrawal (no proofs required). The letter should be signed by the Subscriber.

Step 3. Login into subscriber’s NPS login

With the product enhancement, post July 2020 the entire Withdrawal process is now Online. Subscriber has to login to NPS portal cra-nsdl.com under the subscriber tab with 12 digit NPS PRAN as user ID and password can be set using reset via OTP (either on registered mobile number or registered email ID).

Step 4. Executing the request

Once logged in, under the Subscriber login click on Exit from NPS. Under the same, click on partial withdrawal. The system will automatically show 25% of the own contribution in calculation. Upload the draft application. Complete the OTP authentication. And then within the next 6-7 working days’ time the funds would be credited to the Subscriber bank account.

NOTE : Since this is Subscriber’s own contribution withdrawn, there is no tax incidence.

Conclusion

The NPS partial withdrawal feature offers flexibility to subscribers, allowing access to a portion of accumulated funds for specific needs pre-retirement. Understanding the eligibility criteria, purpose, compliance guidelines, and step-by-step withdrawal process is crucial to leverage this benefit effectively while securing financial stability post-retirement.