NPS Vatsalya Withdrawal Rules: Partial Withdrawal, Exit & Tax

NPS Vatsalya is a pension account for a child, and its money is meant to stay invested for the long term. That is why withdrawals are tightly controlled: before 18 you can take out only a limited part of your contributions for specific needs, and the real choices open up when the child turns 18. This article explains the NPS Vatsalya withdrawal rules as they stand under PFRDA's NPS Vatsalya Scheme Guidelines 2025 — partial withdrawal, maturity and exit at 18, closing the account, what happens on death, and how withdrawals are taxed.

NPS Vatsalya withdrawal rules at a glance

NPS Vatsalya withdrawal rules allow only partial withdrawals before 18: up to 25% of contributions (not returns), after 3 years, for education, specified illnesses or disability above 75%, at most twice. From 18 to 21 the child can exit, taking the full corpus if it is below ₹8 lakh, or up to 80% as a lump sum with at least 20% buying an annuity.

When can you withdraw from NPS Vatsalya?

You can withdraw from NPS Vatsalya in only three situations:

1. Partial withdrawal before 18: For the child's education, treatment of a specified illness, or disability of more than 75%, once the account is at least 3 years old.

2. Exit after 18: When the child turns 18, they can exit the scheme any time up to 21, subject to the ₹8 lakh annuity rule.

3. Death of the child: The whole corpus is paid out to the guardian, nominee or legal heir.

There is no other way to take money out. If your goal is less than 18 years away, keep that money in a separate, more liquid investment.

NPS Vatsalya partial withdrawal rules

Partial withdrawal is the only way to use the money before the child turns 18:

1. Lock-in: At least 3 years from the date the account was opened.

2. Purpose: Only for the child's education, treatment of specified illnesses, or disability of more than 75%.

3. Amount: Up to 25% of the contributions made into the account. The returns earned on them do not count towards the limit.

4. How many times: A maximum of two partial withdrawals before the child turns 18. Between 18 and 21, two more are allowed after the child completes KYC.

5. Tax: Partial withdrawals of up to 25% of contributions are tax-exempt under both tax regimes.

The request is made through the Point of Presence (PoP) that services the account, either at the PoP or through the online access or mobile app provided by the CRA or PoP. The money is paid only into the minor's own bank account or a joint bank account with the minor, so keep one ready even if you skipped it when opening the account.

What happens at maturity — NPS Vatsalya withdrawal after 18 years

NPS Vatsalya does not end automatically at 18. On turning 18, the child must complete fresh KYC and give nominee details, after which the account is theirs to manage. The child then has until 21 to choose one of three options:

If no option is chosen between 18 and 21, the account is moved automatically to a higher-equity scheme of the same Pension Fund under the Multiple Schemes Framework. From then on, it follows the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 — the regular NPS rules meant for retirement — and the Vatsalya exit options above no longer apply. Withdrawals from the shifted account are allowed only after the KYC is completed. If the child does not complete KYC after turning 18, no further transactions are allowed until age 21, after which the account becomes dormant.

If the corpus is above ₹8 lakh at exit, what happens?

If the child exits with a corpus of ₹8 lakh or more, up to 80% can be taken as a lump sum and at least 20% must be used to buy an annuity from an Annuity Service Provider. The annuity then pays a regular pension. Below ₹8 lakh, there is no annuity requirement and the full amount can be withdrawn.

For example, if the corpus at exit is ₹10 lakh, the child can take up to ₹8 lakh as a lump sum and must use at least ₹2 lakh to buy an annuity. Of the lump sum, ₹6 lakh (60% of the corpus) is tax-exempt and the remaining ₹2 lakh is taxable; the ₹2 lakh used for the annuity is exempt at purchase. With a corpus of ₹5 lakh, the full ₹5 lakh can be withdrawn, of which ₹3 lakh is tax-exempt.

How to close an NPS Vatsalya account

An NPS Vatsalya account cannot be closed before the child turns 18; there is no premature closure. Missing a year's minimum contribution of ₹250 does not close it either. The account can be closed only by exiting after 18 under the rules above, or it ends on the death of the child, when the corpus is paid out.

What happens to NPS Vatsalya if the child or the guardian dies?

1. If the child dies: The entire accumulated pension wealth is paid to the guardian, nominee or legal heir, as applicable. The recipient can also choose to move the money into an NPS account. This amount is not treated as the recipient's income for tax.

2. If the guardian dies: A new guardian must be registered with fresh KYC documents. If both parents have died, a legally appointed guardian can continue the account, with or without further contributions.

Is NPS Vatsalya withdrawal tax free?

Partly. According to PFRDA:

So a full lump sum at 18 is not entirely tax-free: the part above 60% of the corpus is taxable. Read more about the tax benefits of NPS Vatsalya.

Frequently asked questions

Does NPS Vatsalya automatically become an NPS Tier I account at 18?

No. At 18 the account stays in NPS Vatsalya, and the child can continue in it up to 21, shift the entire corpus to NPS under the All Citizen model, or exit. Only if no option is chosen by 21 is it moved automatically, to a higher-equity scheme of the same Pension Fund.

Can I withdraw NPS Vatsalya after 18 years?

Yes. Between 18 and 21, the child can exit: the full corpus as a lump sum if it is below ₹8 lakh, or up to 80% as a lump sum with at least 20% in an annuity if it is ₹8 lakh or more.

What is the maturity period of NPS Vatsalya?

There is no fixed maturity date. The account runs until the child turns 18, and the child then has until 21 to continue, shift to regular NPS, or exit. See the NPS Vatsalya lock-in period for details.

Can I withdraw the full amount before 18?

No. Before 18, only partial withdrawals of up to 25% of contributions are allowed, for specific purposes, and only after 3 years.

What happens if my child does not choose any option by 21?

The account moves automatically to a higher-equity scheme of the same Pension Fund and is then governed by the regular NPS exit rules.

What does my child need to do at 18?

Complete fresh KYC and give nominee details. Here is more on what happens when your child turns 18 under NPS Vatsalya.

What can I do if a withdrawal request is delayed or rejected?

Raise a grievance through the CRA's Central Grievance Management System or PFRDA's Pension Sahayak portal. The intermediary must resolve it within 30 days. If you are not satisfied, it can be escalated to NPS Trust, then the Ombudsman, PFRDA and the Securities Appellate Tribunal.

Conclusion

NPS Vatsalya is built to be left alone until the child turns 18: before that, only up to 25% of contributions can be withdrawn, and only for education, specified illnesses or disability. At 18, the child decides whether to continue, move the corpus into regular NPS, or exit, with the full amount available as a lump sum below ₹8 lakh. Knowing these rules up front helps you decide how much of your child's savings belong in NPS Vatsalya. You can open an NPS Vatsalya account for your child online with PensionBox, and read the complete NPS Vatsalya guide for everything else about the scheme.

Sources: PFRDA, NPS Vatsalya and the NPS Trust NPS Vatsalya FAQs, updated 16 June 2026. Tax treatment follows the Income-tax Act and can change; this article is general information, not tax advice. Last updated: 9 October 2026.