NPS Withdrawal Rule: Investing in NPS has always been a double benefit deal. Along with creating a corpus for retirement, it also gives you tax exemption. But, with the tax exemption now being Rs 12 lakh, is it really beneficial to invest in NPS…
Investing in the new pension scheme has always been a double benefit deal. On one hand, the corpus is ready for retirement and on the other hand, tax exemption is also available on investment in it. In the budget presented in February, the government has increased the income tax exemption to Rs 12 lakh. Now the question arises whether those who have invested in options like NPS to save tax can withdraw their money now.
Under the rules of NPS, there is a limit on withdrawal of money on retirement. So does this mean that money can be withdrawn from NPS account only after retirement and if there is a need in between, what is the limit for withdrawal? If you have also opened an NPS account and are investing in it, then it is important to know its limit and rules before withdrawing money.
First understand the NPS account.
If you are also planning to withdraw money from NPS, then it is important to know its rules first. There are 2 types of accounts in NPS, Tier-1 and Tier-2 accounts. To open a Tier-2 account, it is necessary to first find a Tier-1 account. Money cannot be transferred from a Tier-1 account to a Tier-2 account, whereas money can be transferred from a Tier-2 account to a Tier-1 account. 75% can be invested in equity and 5% in Alternative Investment Fund (AIF) from a Tier-1 account. 100% investment can be made in equity through a Tier-2 account. 5% can be invested in AIF from this account.
When and how much money can be withdrawn
Tier-1 account of NPS is the main one and pension is given from this account after retirement. 60% amount can be withdrawn from this account on retirement, while 40% is required to buy annuity. In this way, 100% amount becomes tax free. If the total amount deposited in Tier-1 account of NPS and interest together is less than Rs 5 lakh, then the entire amount can be withdrawn. There is no need to buy annuity in this.
Withdrawal under three conditions before retirement
- On death: If an NPS subscriber working in the private sector dies before the age of 60, his family can withdraw 100% of the amount. The nominee or successor of the subscriber can also buy annuity, but it is not mandatory. If the subscriber has been a government employee, then it will be mandatory for his nominee or successor to buy annuity.
- Partial withdrawal: Partial withdrawal can be made from this account after completion of three years of opening the Tier-1 account of NPS. This money can be used for illness, disability, higher education, marriage, buying property and starting a business. The subscriber is allowed partial withdrawal only 3 times during the entire maturity. In this too, there should be a gap of 5 years between one withdrawal and the other.
- Premature withdrawal: If you want to close your NPS account before completing 60 years, then you can do it any time after 5 years of opening the account. But, in such a situation, you will be able to withdraw only 20 percent of the amount, while 80 percent of the money will have to be used to buy an annuity pension plan. However, if the total corpus is less than Rs 2.5 lakh, then it is not necessary to buy annuity.
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