The NPS i.e. National Pension Scheme is one such government-sponsored option that allows investors to invest and secure finances for their post-retirement life through a disciplined framework for regular savings & investment. It is also one of the few government-sponsored pension schemes that do not have a specific rate of return. NPS interest rates or returns are market-linked, so they are subject to fluctuations based on the market scenarios.
WHEN IS WITHDRAWAL ALLOWED?
As per the PFRDA (Pension Fund Regulatory & Development Authority) Exit Rules, withdrawals under below categories are permitted:
- Upon demise:
The entire accumulated pension corpus shall become payable to the nominee/legal heir of the investor and there would not be any purchase of monthly/annuity pension.
- Upon normal superannuation:
At least 40% of the investor’s accumulated pension corpus has to be used for availing an annuity and the balance is paid as a lump sum to the investor. The investors can avail of complete withdrawal if the overall corpus in the account is below Rs. 2 lakhs as of the retirement date.
- Exit from NPS prior to the age of normal superannuation:
At least 80% of the investor’s accumulated pension corpus needs to be used for purchasing an annuity and the balance is paid to the investor in a lump sum.
NPS Withdrawal - Tier 1 & Tier 2 Account
As we know that NPS offers 2 kinds of accounts namely Tier 1 and Tier 2. To invest in NPS, it is mandatory for investors to open a Tier 1 account. There are certain rules and T&C that must be met to be able to make partial withdrawals from a Tier 1 account.
As per the present rules and T&C, investors can withdraw upto 25% of their own contribution. The limit remains the same for each specified situation where the withdrawal is allowed.
A tier 2 account can only be opened if the investor has opened a Tier 1 account. There are no restrictions with respect to withdrawals from the tier 2 account.
NPS WITHDRAWAL PROCESS
1. Offline Mode:
Investors will need to download the relevant form like retirement, partial withdrawal, or exit form and need to duly fill them. Further, it needs to be attached with all the supporting documents that are specified. These documents need to be submitted to the nearest PoP -S/PoP (Point of Presence Service Provider).
2. Online Process:
- Head to the official website of the NSDL - CRA
- Provide with your user IF which is PRAN and password to sign in
- Under the ‘Transact Online’ tab, select ‘Withdrawal’.
- Choose ‘Withdrawal from Tier - 1’
- Make sure to enter the right PRAN and click submit button
- Provide the percentage of the fund that you are willing to withdraw and give the reason for the same
- Click submit.
- After this process, a form will be generated that the investors should submit at the NPS nodal office along with the specified documents.
DOCUMENTS REQUIRED FOR NPS WITHDRAWAL
Following are the specified documents required at the time of NPS withdrawal:
- KYC Documents
- Original PAN card
- Cross-signed advance receipt of stamp and filled over the revenue stamp by the investor.
- Passbook of the bank, canceled cheque, bank’s letterhead, bank certificate that has the name of the account holder, account number, and IFSC code of the bank.
- Undertaking cum request from
NPS WITHDRAWAL RULES FOR PARTIAL WITHDRAWAL
- An investor should be invested in NPS for a period of at least 3 yrs.
- Withdrawal can be made a maximum of 3 times during the tenure
- Withdrawal sum cannot exceed 25% of the made contributions.
- Withdrawal is permitted against specified reasons, such as higher education, marriage, construction, or purchase of a house and for treatment of critical disease.
HOW TO CHECK THE STATUS OF THE NPS WITHDRAWAL REQUEST?
Investors can check their withdrawal status as per the options give below:
- Through the Limited Access View functionality which is available on the home page of the CRA website.
- This status can also be checked under the menu ‘Exit Withdrawal Request’ by logging into the NPS account.
- Under section 80CCD(1), Rs 1,50,000 exemption is allowed. (provided under entire ta exemption offered under this section)
- Under Section 80CCD(2), 10% of the salary contributed by the employer above and over section 80CCD(1)
- Under Section 80CCD(1b), Rs 50,000 above and over both mentioned sections.