NPS withdrawal rules changed in December 2025, and the change is large. A non-government subscriber can now take up to 80% of the corpus as a lump sum at normal exit, with at least 20% going into an annuity; before, the split was 60% and 40%. Government subscribers keep the 60/40 rule. The catch is tax: the exemption still covers only 60% of the corpus, so the extra 20% is taxable at your slab for now.
The new limits come from the PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025, which PFRDA explained in a press note on 19 December 2025. Everything below applies to Tier I, the retirement account. Tier II, the optional add-on, has never had these rules.
NPS exit limits after December 2025
Who gets 80% and who stays at 60%
The new split is for non-government subscribers: the All Citizen model, corporate NPS accounts and similar. If you are a central or state government employee in NPS, the earlier structure continues, with up to 60% as a lump sum and at least 40% into an annuity.
For non-government subscribers, normal exit no longer means turning 60. It is allowed after 15 years in the scheme or at 60, whichever comes first, and the old lock-in for the All Citizen model has been removed. Corporate-sector accounts still vest at retirement.
How much of the corpus you can take as a lump sum
Normal exit for a corpus above ₹12 lakh, and premature exit above ₹5 lakh, under the December 2025 rules. Smaller corpuses get more, see the table below.
The small-corpus bands
The size of the corpus changes the rule. Smaller pots are allowed to come out whole, because an annuity bought with a few lakh pays too little to matter.
| Corpus at normal exit | What you can do |
|---|---|
| ₹8 lakh or less | Take all of it as a lump sum, or draw it in instalments |
| ₹8 lakh to ₹12 lakh | Take up to ₹6 lakh as a lump sum; the rest through systematic withdrawals over at least six years, or an annuity |
| Above ₹12 lakh | Non-government: up to 80% lump sum, at least 20% annuity. Government: up to 60% lump sum, at least 40% annuity |
The same ₹8 lakh and ₹12 lakh bands apply to government subscribers at normal exit.
Leaving before you qualify: premature exit
If you exit before normal exit is open to you, the rules still push the money towards a pension. You can take up to 20% as a lump sum and at least 80% must buy an annuity. The full-withdrawal threshold here has been raised to ₹5 lakh: a corpus that size or smaller can be taken whole.
Partial withdrawals while you are still in
You do not have to exit to reach some of the money. Once you have been in the scheme for three years, you can make up to four partial withdrawals before 60, at least four years apart, each capped at 25% of your own contributions (the employer's share and the gains do not count). They must be for a specified need:
- treatment of an illness, which is no longer limited to a fixed list of conditions
- a child's higher education or marriage
- buying or building a first house, now allowed once only
- settling a loan taken against your NPS account, a new purpose
Starting a business and skill development, which used to qualify, have been removed.
The tax catch on the extra 20%
This is the part most explainers skip. The income tax exemption on the NPS lump sum covers 60% of the corpus. PFRDA raised the withdrawal limit to 80%, but the tax law was not changed with it, and Budget 2026 left it where it was. So if you take the full 80%, the slice between 60% and 80% is added to your income and taxed at your slab in that year. The annuity's pension is taxed as income too, as it always was.
Taking less than 80% is a legitimate choice. You can leave money invested, defer it, or draw it in instalments across years when your income is lower.
Can you defer, or stay in after 60?
Yes. You can defer the lump sum and the annuity purchase, and stay in the scheme, up to age 85. Deferring keeps the corpus invested, which matters more now that most of it can come out as cash. Whether the money lasts once it does is a separate question, and the retirement calculator shows the chance it does.
What happens to NPS on death
The corpus goes to the nominee or legal heir. They can take all of it as a lump sum, and buying an annuity is optional. Under the amended rules a nominee can also choose to draw it in instalments.
Related nyvo guides
- What Is NPS? The National Pension System Explained – how the account works, now with the 80/20 exit.
- NPS Tax Benefits: 80CCD(1), (1B) and (2) – the deductions on the way in, and how the exit is taxed.
- Turning a Retirement Corpus into Monthly Income – what to do with a lump sum once you have it.
The old rule decided for you: 40% became a pension whether you wanted one or not. The new rule hands you most of the money and most of the decision. That is more freedom, and more ways to get it wrong.
