The Pension Fund Regulatory and Development Authority (PFRDA), in a circular on 21 March, described the process for partial withdrawal from National Pension System (NPS). Being a retirement product, NPS allows partial withdrawals only under some circumstances.
PARTIAL WITHDRAWAL
Subscribers are eligible to withdraw up to 25% of their contributions from their pension fund accounts under certain circumstances after 10 years. These can be for children’s higher education or marriage (including of a legally adopted child), construction or purchase of first house, and treatment of critical illness for self, spouse, children or dependant parents. Thirteen critical illnesses have been defined. Partial withdrawals can also be made in the event of accident or life threatening ailments. You can make up to three withdrawals during the tenor, with a gap of five years between each (not applicable for critical illnesses). In the case of corporate NPS, where your employer also contributes, you can withdraw only from your contributions.
NPS is a defined contribution retirement product that needs you to keep contributing till 60 years of age. The minimum contribution is Rs.6,000. At 60 years of age, you need to annuitise at least 40% of the maturity corpus; the rest can be taken as lump sum. Annuity is a pension product that gives you periodic income or pension. If you wish to exit before 60, you will have to annuitise at least 80% of the money. Again, you will be allowed to exit only after you have stayed in the scheme for at least 10 years.
PFRDA is of the opinion that partial withdrawals should be tax-free, but clarity is awaited from tax authorities.
