NPS Partial Withdrawal Rules: Eligibility & Withdrawal Percentage Explained (2025 Update)

The National Pension System (NPS) is a government-backed retirement savings scheme that encourages long-term investments for future financial security. While it is primarily designed for retirement, the NPS also allows partial withdrawals under certain circumstances—offering flexibility in times of genuine need.

Let’s explore the latest rules on partial withdrawal from NPS, including eligibility criteria and the permissible withdrawal percentage.

What is NPS Partial Withdrawal?

Partial withdrawal in NPS allows subscribers to withdraw a portion of their accumulated corpus before retirement, without closing the account. This is permitted only under specific conditions and subject to regulatory limits.

Eligibility Criteria for NPS Partial Withdrawal

To ensure disciplined savings, the Pension Fund Regulatory and Development Authority (PFRDA) has laid out clear eligibility guidelines:

1. Minimum Subscription Period:
   • The subscriber must have completed at least 3 years of continuous contribution to the NPS account.
2. Purpose of Withdrawal:
   Partial withdrawals are permitted only for specific reasons, including:
   • Higher education of children
   • Marriage of children
   • Purchase or construction of a residential house (in subscriber’s name or jointly with spouse)
   • Medical treatment for critical illnesses* (self, spouse, children, or dependent parents)
   • Start of a new business or venture
   • Skill development or vocational training
3. Frequency Limit:
   • A subscriber can make up to 3 partial withdrawals during their NPS subscription period.

There are 14 specific diseases covered for partial withdrawal, including other critical illnesses of a life-threatening nature as may be mentioned in the circulars, notifications or guidelines issued by PFRDA at different points in time. These include:

1. Cancer
2. Primary pulmonary arterial hypertension
3. Kidney failure (end-stage renal failure)
4. Multiple sclerosis
5. Major organ transplant
6. Coronary artery bypass graft
7. Aorta graft surgery
8. Heart valve surgery
9. Stroke
10. Myocardial infarction
11. Coma
12. Total blindness
13. Paralysis
14. Accident of a serious or life-threatening nature

Permissible Withdrawal Percentage

The PFRDA allows NPS account holders to withdraw maximum up to 25% of their own contributions.

Step-by-step Calculation:

Let’s say you’ve been investing in NPS for 8 years with the following contributions:

• Your monthly contribution: ₹5,000
• Number of months contributed: 96 months (8 years)
• Total contribution by you = ₹5,000 × 96 = ₹4,80,000

Now, you want to make a partial withdrawal for your child’s education.

1. Your total contribution = ₹4,80,000
2. 25% of ₹4,80,000 = ₹1,20,000

So, you are eligible to withdraw ₹1,20,000 from your NPS account under partial withdrawal rules.

Important Notes:

If your corpus (total balance) is ₹7 lakhs due to investment growth and employer share, it doesn’t matter—the 25% is still calculated only on your ₹4.8 lakh contribution.

You cannot include employer’s contributions or returns/growth in this calculation.

• Withdrawals are tax-exempt under Section 10(12B) of the Income Tax Act (if the conditions are met).

Things to Keep in Mind

• Partial withdrawal does not affect the overall status of your NPS Tier I account.
• Withdrawal requests must be submitted via the central recordkeeping agency (CRA) or through your Point of Presence (PoP).
• Required documents (like medical certificates, education proof, etc.) must be submitted for approval.
• The Tier II NPS account, being voluntary and non-pension in nature, allows full withdrawal anytime without restrictions.

Conclusion

NPS partial withdrawal offers a much-needed financial cushion without compromising your retirement goals. While the rules are designed to discourage frequent withdrawals, the system provides essential flexibility during key life events. Always consider the long-term impact on your retirement corpus before opting for partial withdrawal.

By staying informed about NPS rules, you can better manage your financial planning—striking a balance between current needs and future security.

Read Also: Unified Pension Scheme (UPS) key features & Benefits: UPS vs NPS which is better?