PensionBox BlogsAll you need to know about Withdrawal in NPS

All you need to know about Withdrawal in NPS

05 Sep 20265 min read
Written By
Pranat Modi
Pranat Modi
PensionBox

The Government of India established the National Pension Scheme (NPS) to provide citizens with a secure future after retirement. It is usually observed that participation in a scheme is frequently easier than exiting a scheme. That's not the case with the National Pension Plan, which offers various withdrawal choices.

NPS Withdrawals

Subscribers may withdraw only up to 25% of their significant contribution, but only three times during their plan. To qualify for partial withdrawal, the subscriber must participate in the plan for about 3 years. Further, partial withdrawals are permitted only for children's education, wedding expenses, house construction, or emergencies.

NPS tier 1 account and their withdrawals

Tier-1 account is a non-withdrawal permanent retirement account in which the subscribers' contributions are invested and credited according to the fund manager or the plan subscribed to. Tax-free withdrawals are limited to up to INR 1L, and above that, only 20% of those funds can be withdrawn (taxes apply). Remaining 80% of the funds must be invested in annuities.

NPS tier 2 account and their withdrawals

Another voluntary withdrawable account is the NPS tier-2 account which is available only to those who already have a tier-1 account under their names. Withdrawal in this account works as per the convenience of the subscriber. Tier-2 accounts have unlimited withdrawal effects, just like any other savings account. In contrast, withdrawing money from NPS can be time-consuming due to the limited number of Points of Presence where withdrawal requests can be made. There is also no online portal, which adds to the length of the process.

Tax on NPS withdrawals

When the NPS account matures, one might withdraw 60% of the sum, which is completely tax-free. The remaining 40% of the contribution can be used to purchase annuities, which again is tax-free.

Update — NPS exit rules changed in December 2025. The 60% / 40% split described above was the rule up to that point. It is left here on purpose, because a lot of older paperwork and third-party calculators still quote it. Under the PFRDA (Exits and Withdrawals under NPS) Amendment Regulations notified on 16 December 2025, a non-government subscriber (All Citizen and Corporate NPS) taking normal exit can now withdraw up to 80% as a lump sum, with a minimum 20% annuity. By corpus: up to ₹8 lakh — the entire amount can be withdrawn; above ₹8 lakh and up to ₹12 lakh — up to ₹6 lakh as lump sum, with the balance going into an annuity or a Systematic Unit Redemption spread over at least six years; above ₹12 lakh — up to 80% lump sum with a minimum 20% annuity. For premature exit there is no longer any minimum subscription period, and a corpus up to ₹5 lakh can be taken in full. One caution on tax, because it is a separate question from the withdrawal limit: Section 10(12A) exempts 60% of the corpus, and whether the extra 20% of lump sum is tax-free has not been settled — do not plan around it without checking. (Source: PFRDA FAQs on Exits and Withdrawals from NPS, All Citizen Model, updated March 2026.)

NPS Withdrawal due to the User’s Death

According to the PFRDA (Exits and Withdrawals under NPS) Regulations 2015 and provisions thereto, in the event of the User's death, the entire access to adequate wealth of the User (100 percent NPS Corpus) paid to the Nominees or Family members, as the case may be. However, the deceased User's Nomination Heir shall have the option to buy any of the annuities of been offered upon exit, while trying to apply for withdrawal of benefits from the deceased Subscriber's Permanent Retirement Account. If the nominee/legal heir wishes to choose an annuity (pension), they must select an Annuity Service Provider (ASP) and annuity Scheme on the Death Withdrawal Form.

How much time does it take to process a withdrawal request ?

In most cases, the funds are credited to one's bank account within 24 hours of the request if the invitations are submitted well before the cut-off time. Your bank account will not be credited with the funds for 48 hours if your request is submitted after the deadline.

Documents required from Nominee in case of death withdrawal request

Following are the documents required to submit in case of death withdrawal request.

  1. Organised Death Withdrawal Form
  2. Death certificate
  3. KYC Files (identity & address proof)
  4. Account Bank details, and other documents.
  5. All People of India Sector, under "Forms," contains a list of additional documents to be submitted.

Process to be followed by Nominee

Nominees and claimants must submit the death withdrawal form, along with any supporting documents, from the subscriber's related Point of Presence (POP). POP processes the death withdrawal requests through the CRA system online, and after the process, funds are transferred to the nominee/claimant within the timeframes specified. In addition, the selected annuity by the heir, and Respondent's information is shared with the Annuity Service Provider (ASP) to complete the prior formalities.

How will PensionBox help ?

The financial health of your workforce boosts morale and output at work. With PensionBox, your employees can more effectively plan their retirement, keep track of all of their private pensions, including EPF, PPF, and NPS, in one location, and get prospective. Still the Withdrawing NPS feature is not yet available but soon it's going to be active.

Sign Up and download the app on Android and on IOS.

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Frequently asked questions
PensionBox is India’s first pension platform/app that helps you access, invest in, and track your NPS and other pension products with better user experience & minimum charges.

PensionBox simplifies the National Pension System(NPS), the government's pension scheme for private employees both for retail users and HRs/companies.

If you don’t have an NPS account, you can simply open your pension account within 2 minutes and if you have NPS PRAN already, you will be able track, invest and manage everything free of charge with best user experience.
Absolutely. PensionBox is fully ISO 27001 compliant with the Pension Fund Regulatory and Development Authority (PFRDA), the government body that regulates pensions in India.

We never touch or hold your money directly, your investments go safely to your chosen pension fund through approved channels.

We are built with Zerodha as POP , ensuring transparency, data security, and peace of mind. Your retirement savings are protected by regulation and secured by technology.
Banks/POPs charges high fees on account opening & every investment Even CRA apps have hidden charges/low transparency & lack timely support Pension Funds restrict pension fund choice & selection to themselves.

That’s why, PensionBox brings transparency, zero charges, timely support and freedom to select any pension fund so that you get the best experience investing in NPS & be better future ready.

That’s not it, we help you & your company together to maximise contribution and tax savings with minimal charges & best user experience.
It’s super easy to use PensionBox, just start by signing up using your browser on laptop/mobile or downloading the app on appstore or playstore.

If you are an existing zerodha user then you get a fast login or sign up using kite ID.

Once you are onboarded with kite ID, you get free access to
  • Open NPS in 2 minutes
  • Track existing NPS
  • POP shift or CRA shifting
  • Invest in one time or create SIP in NPS
  • Withdraw NPS requests & instant withdraw tier 2
  • Create your dream retirement plan
  • Open NPS Vatsalya for your kid
  • Share with HR (To unlock more tax benefits)
Tax Benefits in New Tax Regime
  • Employer Contribution:
    • Contributions made by your employer to your NPS account are tax-free up to 14% of your basic salary under Section 80CCD(2). Do connect us with your HR to enable this for you.
    Tax Benefits in Old Tax Regime
  • Self-Contribution:
    • Deduction up to ₹1.5 lakh under Section 80C.
    • Additional deduction of ₹50,000 under Section 80CCD(1B) — exclusive to NPS investments!
    • This allows you to claim a total deduction of up to ₹2 lakh every year on your NPS contributions.
  • Employer Contribution:
    • Contributions made by your employer to your NPS account are tax-free up to 10% of your basic salary (Basic + DA) under Section 80CCD(2). Do connect us with your HR to enable this for you.
    • This is over and above your personal deduction limits, giving you extra tax efficiency.
We understand NPS can be confusing, complex and there is a lot of information out there to believe in. Don’t worry, our team is here to help you with the right information.

Feel free to book a free call to learn more about NPS, NPS Vatsalya, Corporate NPS & PensionBox or contact the support team.
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