NPS Withdrawal Rules

NPS withdrawal rules permit subscribers to withdraw up to 60% of the accumulated corpus as a lump sum upon meeting the eligibility conditions. Explore the rules and the online or offline withdrawal process.
OPEN FD
NPS Withdrawal
OPEN FD
3 min
05-March-2026

The National Pension System (NPS) is one of the most trusted government-backed retirement savings plans in India. While it encourages long-term wealth creation, it also gives you the flexibility of partial and premature withdrawals for life’s emergencies.

But here’s a thought: while NPS builds your pension corpus, pairing it with safe options like Fixed Deposits (FDs) can balance your portfolio. With FDs, you get assured returns and flexible tenures—a strong backup for your financial future.

 

What is NPS Withdrawal?

NPS withdrawal refers to the process through which a subscriber can withdraw money accumulated in their National Pension System (NPS) account. Withdrawals can happen at retirement, before retirement, or under specific conditions. Typically, after turning 60 years, a subscriber can withdraw up to 60% of the corpus as a lump sum, while the remaining amount is used to purchase an annuity that provides regular pension income.


NPS withdrawal rules

NPS withdrawals vary depending on whether you use the mandatory Tier 1 account or the optional Tier 2 account, and whether the withdrawal is at retirement, premature, or partial.

1. Partial premature withdrawal

You can withdraw up to 25% of your contributions after a minimum lock-in of 3 years, but only for specific reasons like:

  • Higher education of children
  • Marriage expenses
  • Treatment of critical illness
  • Purchase or construction of a house

You can make up to three such withdrawals in your lifetime, with at least a 5-year gap between them.

For emergencies that don’t qualify under NPS rules, you can rely on a Bajaj Finance FD. With the option of loans against FDs, you don’t need to break your investment and can still access quick funds. Open FD.

2. Withdrawal at retirement

  • At age 60, at least 40% of your corpus must be used to purchase an annuity (monthly pension).
  • The remaining 60% can be withdrawn as a lump sum.
  • If your total corpus is Rs. 5 lakh or less, you can withdraw the entire amount.

If you want steady income alongside NPS annuities, open a Bajaj Finance FD with periodic interest payouts (monthly, quarterly, half-yearly or yearly). It ensures consistent cash flow in retirement. Check latest rates.

3. Withdrawal due to premature exit

  • Premature exit is allowed after 5 years.
  • At least 80% of the corpus must go into an annuity.
  • Remaining 20% can be withdrawn as a lump sum.
  • If corpus ≤ Rs. 2.5 lakh, you can withdraw the full amount.

For short to medium-term goals, FDs provide a risk-free growth option with flexible tenures ranging from 12 to 60 months. Open an FD account and start earning up to 7.30% p.a. returns with Bajaj Finance FDs.

4. Death of the Subscriber

  • For private sector employees: Legal heirs or nominees can withdraw 100% of the corpus.
  • For government employees:
    • If corpus ≤ Rs. 5 lakh: Full withdrawal is allowed.
    • If corpus > Rs. 5 lakh: 80% must go to annuity; the rest can be withdrawn as a lump sum.

Also Read: Employer Contribution to NPS Account

Fixed deposit variants

Highest Credit Ratings | Trusted with over 1.4 million Deposits | Assured Returns on FD
Recommended

Fixed Deposit - 60 Months

INTEREST RATES UP TO
7.30% p.a.
Invest Online

Fixed Deposit - Senior Citizen

INTEREST RATES UP TO
7.30% p.a.
Invest Online

Fixed Deposit - Age below 60

INTEREST RATES UP TO
6.95% p.a.
Open FD

Fixed Deposit - Minor

INTEREST RATES UP TO
6.95% p.a.
Open FD

Fixed Deposit - HUF

INTEREST RATES UP TO
6.95% p.a.
Open FD

Fixed Deposit - Sole Proprietor

INTEREST RATES UP TO
6.95% p.a.
Open FD

NPS withdrawal rules for corporate employees

At retirement

  • At least 40% of corpus > annuity purchase.

  • Remaining 60% > lump sum withdrawal or reinvestment.

  • Lump sum is tax-free up to 40%; the rest is taxable.

Early retirement

  • Full withdrawal allowed if corpus ≤ Rs. 2.5 lakh.

  • If larger, 80% must be annuitized, and 20% can be withdrawn.

To avoid depending only on annuity payouts, consider FD ladders with Bajaj Finance, staggered investments across multiple tenures so your funds mature at regular intervals. Open FDs.

Fixed Deposit

  1. Trusted by over 5 lakh customers
  2. Fixed Deposits worth more than Rs. 50,000 crore booked
  3. Rated CRISIL AAA/STABLE and [ICRA]AAA(STABLE)
  4. Up to 0.35% p.a. extra interest offered for senior citizens
  5. Flexible interest payout options available - Monthly, Quarterly, Half-yearly, Annually or at Maturity

By proceeding, you agree to our Terms and Conditions

NPS withdrawal rules for Government employees

  • Corpus ≤ Rs. 5 lakh > Full withdrawal allowed.

  • Corpus > Rs. 5 lakh > 80% annuitized, 20% lump sum.

  • If no dependent family, wealth is distributed to children or other legal heirs.

What is the process for withdrawal from NPS?

1. NPS Tier 1 withdrawals

NPS Tier 1 accounts allow for easy online withdrawal request submissions. We have outlined the NPS online withdrawal process below:

Step 1: Visit the NSDL-CRA website
Step 2: Log in using your user ID (PRAN) and password
Step 3: Go to the ‘Transact Online’ tab and select the ‘Withdrawal’ option
Step 4: Select the ‘Partial Withdrawal from Tier 1’ option
Step 5: Enter the withdrawal reason and the specific percentage of funds you wish to withdraw
Step 6: Click on ‘Submit’

(Note: The steps outlined above pertain to partial withdrawals. Steps vary for superannuation and premature exits)

Upon successful submission, the system will generate a form. You have to submit this form along with the following documents to the nodal office:

  • PRAN Card

  • KYC documents

  • Bank account verification documents like passbook or cancelled cheque with details like account holder’s name, account number, IFSC, etc.

  • Advance stamp receipt that is cross-signed on the revenue stamp by the NPS account holder

  • Request-cum-undertaking form if the request pertains to maturity withdrawals

For offline NPS withdrawals, you can download the necessary form and fill in the relevant details. The duly filled form, along with the supporting documents mentioned above, must be submitted at the nearest Point of Presence Service Provider (PoP/PoP-SP).

2. NPS Tier 2 withdrawals

To withdraw funds from an NPS Tier 2  account, you need to submit a duly filled form UOS-S12 and other supporting documents to the nodal office or PoP-SP. Once the request is registered, the amount will be dispersed in 3 days.

Also Read: How to open an NPS Corporate Account

NPS withdrawal limit for Tier 2 account

There are no limits on NPS Tier 2 account withdrawals since Tier 2 accounts are voluntary. In other words, subscribers can withdraw funds from a Tier 2 account as and when required to meet their needs. Tier 2 accounts function like savings accounts, allowing restriction-free withdrawals. While NPS withdrawal rules do not apply to Tier 2 accounts, you should note that voluntary Tier 2 investments are exempt from all the tax benefits under Section 80(C).

NPS withdrawal limit for Tier 1 account

As opposed to Tier 2 withdrawals, withdrawals from NPS Tier 1 accounts are subject to various rules and limits. As a subscriber, you are permitted to make partial and complete withdrawals only under certain conditions. Moreover, NPS Tier 1 withdrawals place a cap on the amount that can be withdrawn and the minimum lock-in period.

Also Read: How to Invest in NPS Online

Pro tip

Bajaj Finance offers attractive Fixed Deposit interest rates of up to 6.95% p.a. for non-senior citizens, and up to 7.30% p.a. for senior citizens, inclusive of an additional rate benefit of up to 0.35% p.a.

systematic-deposit-plan-pro-tip-banner

Tax implications on NPS

The taxation of NPS withdrawals varies depending on whether the amount is taken as a lump sum, used to purchase an annuity, or withdrawn partially.


At retirement or maturity, up to 60% of the accumulated corpus can be withdrawn tax-free. In case of premature exit, up to 20% of the corpus is exempt from tax. Additionally, partial withdrawals for approved purposes are tax-free within the specified limits.

Withdrawal TypeTax Treatment
Lump sum at retirementUp to 60% of the total corpus is tax-free
Annuity incomeTaxable as per the applicable income tax slab
Partial withdrawalUp to 25% of the subscriber’s own contributions is tax-free for permitted purposes
Premature withdrawalUp to 20% of the corpus can be withdrawn tax-free

For tax-efficient and market-independent growth, Bajaj Finance FD offers assured interest rates—immune to market ups and downs. Check interest rates.

 

Conclusion

The National Pension System (NPS) is a well-structured plan to secure your retirement with annuities and lump-sum withdrawals. But with restrictions on premature and partial exits, it is important to combine it with flexible, low-risk investments.

A Bajaj Finance Fixed Deposit can complement your NPS corpus by offering up to 7.30% p.a. assured returns, liquidity through premature withdrawal or loans, and flexible tenures. Together, they create a well-rounded retirement plan—stable, flexible, and stress-free. Open FD account.

Calculate your expected investment returns with the help of our investment calculators

Investment Calculator
Fixed Deposit CalculatorSukanya Samriddhi Yojana CalculatorPPF Calculator
Recurring Deposit CalculatorProvident Fund CalculatorGratuity Calculator
 

Frequently asked questions

Can I withdraw my NPS amount?

Yes. NPS Tier 1 accounts allow partial withdrawals of up to 25% after 3 years of investment for specific purposes.

Can I exit from NPS after 3 years?

Yes. Normal exit after 3 years is permitted. However, 40% of the corpus has to be used to purchase annuity, the rest may be withdrawn as a lump sum. 100% withdrawal is allowed if the corpus is less than or equal to Rs. 5 lakh.

Can I withdraw money from NPS if I quit my job?

NPS allows partial withdrawals only for specific reasons like critical illness, children’s marriage, higher education, etc. Job loss is not a valid reason for partial withdrawal. You can, however, make a premature exit from the NPS investment.

Is NPS withdrawal taxable?

Up to 60% of the total corpus withdrawn as a lump sum is tax-exempt. For instance, if the corpus at the time of exit is Rs. 10 lakhs, you can withdraw Rs. 6 lakhs (60% of the corpus) without incurring any tax. If you choose to withdraw 60% of the NPS corpus as a lump sum and use the remaining 40% to buy an annuity, no tax is due on the lump sum withdrawal. However, the annuity income received in future years will be taxable according to the applicable income tax slabs.

What is the new rule for NPS withdrawal?

Under the updated National Pension System (NPS) regulations, subscribers can withdraw up to 25% of their own contributions from the account for specific purposes after completing at least three years from the date of account opening. These partial withdrawals are allowed for approved needs such as education, marriage, or medical expenses, subject to prescribed conditions.

Can I withdraw 100% from NPS?

Yes, you can make a full withdrawal from your NPS account if your total corpus is Rs. 5 lakh or less. In such cases, the entire amount can be withdrawn as a lump sum. However, if your corpus exceeds Rs. 5 lakh, you must use at least 40% of it to purchase an annuity, while the remaining 60% can be withdrawn as a lump sum.

Can I withdraw money from the National Pension Scheme after retirement?

Yes, NPS allows phased withdrawals after retirement. You can choose to withdraw the lump sum amount in instalments—up to 10 instalments—between the age of 60 and 75 (or as per the retirement age defined by your employer). This helps in better retirement income planning.

Can I withdraw from my NPS Tier I account before retirement?

Yes, partial withdrawals from a Tier I account are allowed, but only after completing 3 years under the scheme. You can withdraw up to 25% of your individual or voluntary contributions for specific purposes such as medical treatment, education, or purchasing a home.

Is NPS Tier 2 withdrawal flexible?

Absolutely. NPS Tier 2 offers complete flexibility, allowing you to withdraw funds at any time. However, government employees investing in Tier 2 for tax benefits under Section 80C must observe a 3-year lock-in period.

Is withdrawal from NPS Tier 2 taxable?

Yes, withdrawals from an NPS Tier 2 account are treated as part of your total income and taxed according to your applicable income tax slab. Also, unlike Tier 1, funds cannot be transferred from a Tier 2 account, but transfers to Tier 1 or from EPF to Tier 1 are allowed.

Is NPS better than FDs?

NPS builds long-term pension wealth, while FDs provide assured short- and medium-term returns. A mix of both ensures stability and growth.

With Bajaj Finance FDs you can earn up to 7.30% p.a. returns. Book now!

Show More Show Less

Related videos

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

GET THE APP

Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.