NPS Partial Withdrawal Rules 2024: The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new rule regarding partial withdrawals from the National Pension System (NPS). As per the circular issued by the PFRDA on January 12, 2024, subscribers are now allowed to make partial withdrawals from their NPS accounts for specific purposes. These purposes include higher education, marriage, residential house purchase, and medical expenses. It is important to note that this NPS Partial Withdrawal Rules 2024 will come into effect from February 1, 2024. However, it does not invalidate any previous circulars issued by the authority. The earlier circulars will remain in force until they are incorporated into the NPS Partial Withdrawal Rules 2024 new Master Circular.
It is important to carefully consider whether to partially withdraw from your NPS account or avoid it altogether. The NPS is designed to maximize retirement savings and offers tax benefits, making it a crucial part of retirement planning. While the scheme does allow for withdrawals in certain life events, such as education, marriage, medical emergencies, or home purchases, it is essential to remember that the primary goal of the NPS is to provide financial security during retirement. Unless you have an urgent financial need or a potentially higher return investment opportunity (with associated risks) that you are comfortable with, it is generally advisable to keep your NPS corpus intact. This approach ensures that you can benefit from the scheme’s long-term growth potential and secure a more financially stable retirement. Experts suggest building a separate emergency corpus and obtaining adequate health insurance to avoid the need for partial withdrawal from your NPS corpus, as this can impact your retirement savings.
NPS Partial Withdrawal Rules 2024
NPS: Partial withdrawals can be made for the following purposes-
- Funding the higher education of the subscriber’s children, including legally adopted children.
- Supporting the marriage of the subscriber’s children, including legally adopted children.
- Utilizing the funds for the purchase or construction of a residential house or flat in the subscriber’s name or jointly with their legally wedded spouse. However, if the subscriber already owns a residential property (excluding ancestral property), no withdrawal will be allowed.
- Covering the expenses related to the treatment of specified illnesses, including hospitalization and treatment costs for diseases such as cancer, kidney failure (End Stage Renal Failure), primary pulmonary arterial hypertension, multiple sclerosis, major organ transplant, coronary artery bypass graft, aorta graft surgery, heart valve surgery, stroke, myocardial infarction, coma, total blindness, paralysis, accidents of serious/life-threatening nature, and Covid-19.
- Meeting medical and incidental expenses arising from the subscriber’s disability or incapacitation.
- Supporting expenses incurred by the subscriber for skill development/re-skilling or any other self-development activities.
- Assisting the subscriber in covering expenses for the establishment of their venture or any start-ups.
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NPS: Criteria for Eligibility, Limit, and Frequency of Partial Withdrawal
- To be eligible for NPS partial withdrawal, the subscriber must have been a member of the National Pension System for a minimum of three years from the date of joining.
- The amount of partial withdrawal should not exceed twenty-five percent of the subscriber’s total contributions in their pension account, excluding the employer’s contribution as of the date of withdrawal application. Returns generated on the contributions are not eligible for partial withdrawal.
- A subscriber can make a maximum of three partial withdrawals throughout their subscription tenure under the National Pension System. For subsequent partial withdrawals, only the incremental contributions made by the subscriber from the date of the previous partial withdrawal will be allowed.
NPS: Request for Withdrawal Submission
- To initiate the withdrawal process, the subscriber is required to submit a formal request for withdrawal to the central recordkeeping agency.
- This request should be accompanied by a self-declaration, clearly stating the purpose for the withdrawal.
- The submission of the request can be done through the subscriber’s respective Government Nodal Office or Point of Presence, depending on the situation.
- However, in cases where the subscriber is afflicted with any illness mentioned in paragraph 6(d) of this master circular, the withdrawal request may be submitted by any family member of the subscriber.
NPS: Processing and Authentication
- Upon receipt of the withdrawal request, the Point of Presence or Government Nodal Office, as applicable, will undertake the required procedures to authenticate the beneficiary.
- The CRA will process partial withdrawal requests only after successfully verifying the subscriber’s bank account through the utilization of advanced technologies like “Instant Bank Account verification,” which may involve methods such as penny drops or other cutting-edge technological upgrades.