NPS withdrawal rules depend on when and why you take the money out. At 60 you can take up to 60% of the corpus as a tax-free lump sum, and at least 40% must buy an annuity, though a corpus of ₹5 lakh or less can be withdrawn in full. Before 60 you can make limited partial withdrawals, and a full early exit forces at least 80% into an annuity.
NPS Tier I is a locked retirement account, and the rules exist to keep it that way until you retire.
NPS withdrawal limits
What are the NPS withdrawal rules?
The rules govern three moments: retiring at 60, taking a partial withdrawal before then, and exiting early altogether. Each has its own limits. Note that all of this applies to Tier I, the core retirement account. Tier II, the optional flexible add-on, has no lock-in and none of these rules.
Withdrawal at 60: the 60/40 split
At 60, your Tier I corpus is split by rule. Up to 60% can be taken as a lump sum, and that portion is tax-free. At least 40% must be used to buy an annuity, a product from a life insurer that pays a pension for life, and that pension is taxed as income in the year you receive it.
There is an exemption for small pots. If the total corpus is ₹5 lakh or less, you can withdraw the entire amount as a lump sum and skip the annuity. You do not have to take the money at 60 either; you can start withdrawal any time up to 75.
Partial withdrawal before 60
NPS allows limited partial withdrawals from Tier I while you are still contributing, with strict conditions:
- You can withdraw up to 25% of your own contributions (not the employer's share, and not the gains).
- The account must have been open for at least three years.
- You can do it a maximum of three times over the life of the account.
- It must be for a specified reason: children's higher education or marriage, buying or building a first house, treatment of a serious illness, a disability, or starting a business.
These withdrawals are tax-free within those limits. They are meant for genuine milestones, not routine access.
Premature exit before 60
If you want out of NPS entirely before 60, the rules flip to protect the pension purpose. On a premature exit, at least 80% of the corpus must be used to buy an annuity, and you can take at most 20% as a lump sum, the reverse of the 60/40 split at retirement.
The small-pot exemption is lower here: if the corpus is ₹2.5 lakh or less, you can withdraw the whole amount and skip the annuity. This asymmetry, 60% lump sum at 60 versus only 20% before, is deliberate, and it is why NPS suits money you genuinely intend to leave until retirement.
| Situation | Lump sum | Annuity | Full-withdrawal threshold |
|---|---|---|---|
| At 60 | up to 60%, tax-free | at least 40% | corpus ≤ ₹5 lakh |
| Premature (before 60) | up to 20% | at least 80% | corpus ≤ ₹2.5 lakh |
How much you can take as a lump sum, by exit route
At 60 up to 60% is a tax-free lump sum; before 60 only 20%, with the rest into an annuity. Small pots (₹5 lakh at 60, ₹2.5 lakh earlier) can be taken whole.
Can you defer or keep contributing after 60?
Yes. You are not forced to withdraw at 60. You can defer the lump sum, defer the annuity purchase, or keep contributing to the account up to age 75. This lets the corpus stay invested and compound for longer if you do not need it immediately. You can also exit in stages within the rules.
What happens to NPS on death?
If the subscriber dies, the accumulated corpus goes to the nominee or legal heir. For a non-government account, the nominee can generally take the entire corpus as a lump sum, or choose to buy an annuity with part of it. The exact route depends on the account type and the rules in force, so the nominee should confirm the current process with the fund.
Related NYVO guides
- What Is NPS? The National Pension System Explained – how the account and the 60/40 exit fit together.
- NPS Tax Benefits: 80CCD(1), (1B) and (2) – the deductions on the way in, and how the exit is taxed.
- Atal Pension Yojana (APY): How It Works – a fixed, government-backed pension with very different withdrawal rules.
NPS trades access for structure. The withdrawal rules push you to leave the money until 60 and then take part of it as a lifelong pension. Read them before you contribute, so the lock-in is a choice you made, not a surprise you meet at 60.
