Updated January 22nd, 2024 at 16:50 IST
National Pension System: New Rules on Partial Withdrawal Effective from February 1, 2024 - Know More
The primary alteration in the rules pertains to individuals who already own a house, read more in details
Pension Fund Regulatory and Development Authority (PFRDA) has recently announced significant changes in the rules governing partial withdrawal under the National Pension System (NPS).
These changes, slated to come into effect from February 1, 2024, bring about key modifications, particularly regarding withdrawals for property-related purposes.
The primary alteration in the rules pertains to individuals who already own a house. According to the updated guidelines, if you already have a house registered in your name or jointly with your spouse, you will no longer be eligible for partial withdrawal from your NPS account for purchasing or constructing another house.
NPS, designed as a long-term pension scheme, emphasizes specific needs for which partial withdrawals are permitted. The updated regulations emphasize the following conditions:
Frequency and Conditions for Partial Withdrawals:
- Partial withdrawals can only be made three times during the entire tenure.
- A minimum gap of 5 years is required between each partial withdrawal.
- Each withdrawal is limited to a maximum of 25 percent of the total contribution.
Permissible Purposes for Partial Withdrawal:
- Higher education expenses for children.
- Marriage expenses of children.
- Home purchase or repayment of home loan.
- Medical expenses related to serious illness.
- Emergency situations.
- Starting a business or entrepreneurial venture.
Additional Conditions for Partial Withdrawal
To ensure responsible use of NPS funds, certain conditions have been stipulated:
- The subscriber must be a member for a minimum of three years from the account opening date.
- Withdrawals exceeding 25 percent are not permissible.
- Subscribers can make partial withdrawals a maximum of three times.
Withdrawal Procedures and Eligibility
- Withdrawal requests for 25 percent or less can be initiated through the Central Recordkeeping Agency (CRA) representative, facilitated by the government nodal officer.
- Details and reasons for withdrawal must be provided in the request.
- In the case of illness, a family member or nominee can make the withdrawal request on behalf of the subscriber.
Upon reaching the age of 60 (retirement), NPS subscribers are entitled to withdraw 60 percent of the total maturity amount in a lump sum, which is tax-free. The remaining 40 percent must be invested in an annuity plan to receive a pension. While the amount invested in annuity is tax-free, the pension received is not exempt from taxation.
These revised rules aim to ensure responsible and purposeful use of NPS funds, aligning with the core objective of securing financial stability during retirement. It's crucial for subscribers to familiarize themselves with these changes to make informed decisions about their NPS accounts.
Published January 22nd, 2024 at 16:50 IST