Several people experienced financial difficulties during the COVID period; as a result, members of the national pension scheme (NPS) sought to withdraw a portion of their funds from the scheme; however, the pension regulatory body amended some rules regarding the withdrawal of funds from the scheme.
According to a new order issued by the Pension Fund Regulatory and Development Authority (PFRDA) regarding these NPS withdrawals, customers of all government sector customers (Centre, State, and Central Autonomous Body) can now submit their application for partial withdrawal (NPS Partial Withdrawal), which must be submitted only to the nodal officer.
Previously, the (PFRDA) allowed NPS subscribers to submit online applications for partial withdrawals using self-declaration in January 2021. Subscribers' online applications were processed directly through the Central Recordkeeping Agency (CRA) system, followed by instant bank account verification.
NPS withdrawal policies
- Invest in NPS for at least three years and take 25% of the total contribution.
- Withdrawals are permitted three times during the subscription period.
- For several important reasons, partial withdrawal is possible.
What are the reasons for the NPS withdrawal rules?
- Children's higher education
- Children's marriages
- For the purchase or construction of a single-family home (in specified conditions)
- For the treatment of life-threatening illnesses
What are the advantages of putting money into NPS?
Investing in NPS provides a Rs 50,000 tax exemption (NPS Benefits) under the National Pension System 80CCD (1B). On maturity, you can withdraw up to 60% of the deposited corpus. The remainder is set aside for a pension or annuity.
This National Pension System Trust is backed by the Government of India and run by the Pension Fund Regulator, or PFRDA, which is also backed by the Government of India, so investing in it is completely risk-free.
Previous circular and Changes
Following the COVID-19 pandemic, the pension regulator allowed NPS subscribers to request a partial withdrawal online via self-declaration in January 2021, with no documents required. With the resolution of pandemic-related issues and the relaxation of lockdown restrictions, the PFRDA announced that the online partial withdrawal facility from NPS via self-declaration will no longer be available to government sector subscribers.
Premature withdrawal conditions
The NPS allows investors to withdraw prematurely after three years, but the withdrawal amount cannot exceed 25% of the subscribers' contributions.
Withdrawal is permitted only for specific reasons, such as children's higher education, marriage, the purchase/construction of a residential house (under certain conditions), and the treatment of critical illnesses.
Subscribers may make a maximum of three partial withdrawals during the term of their NPS subscription. The subscriber can initiate a partial withdrawal request online.
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