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NPS Retirement Withdrawal 2026: New Rules on Lump Sum & Monthly Pension

NPS UPDATE

Vikram Singh

February 20, 2026 at 10:01 AM IST · 3 min read

NPS Withdrawal Policy 2026: If you’ve built a substantial corpus by contributing every penny to the National Pension System (NPS) over the years, now’s the time to understand how this money will be deposited after retirement. According to the new rules for 2026, your total corpus will determine how much you can withdraw at once and how much monthly pension you will receive.

To make the withdrawal process more flexible, PFRDA has introduced innovative options like SLW and SUR, which provide a new direction to your financial independence. Let’s explore in detail the tax liability on your investments and how to create a smart retirement plan.

Fund Value Determines Withdrawal Method

The total amount deposited in your NPS account at the time of retirement determines the amount of lump sum withdrawal the department will allow you to withdraw. The government has set clear limits for different fund sizes to ensure social security for the elderly.

NPS Withdrawal Rules

SLW vs. SUR

NPS now offers two distinct methods for generating regular income after retirement. Understanding the difference between these two is crucial for future planning.

Systematic Lump-Sum Withdrawal (SLW)

In this, you set aside a fixed amount, such as ₹50,000, every month. Whether the market goes up or down, the same fixed amount will be credited to your bank account. This is ideal for those who need a fixed budget for household expenses.

Systematic Unit Redemption (SUR)

Here, you set aside units instead of an amount. Suppose you choose to sell 5,000 units every month. If the market is bullish and the NAV is high, you will receive more money that month, and if the market is bearish, you will receive less. In this, your funds increase or decrease with the market’s movement.

Market Downturns Impact the Fund

These two options behave differently when the stock market declines. In SLW, your income remains stable, but when the market falls, the system has to sell more of your units to raise the same amount, risking depletion of your funds quickly. On the other hand, in SUR, your units remain safe because a fixed number of units are sold each month, but your monthly income may decrease, disrupting your budget.

Bucket Strategy

New NPS Rules 2026

If you choose SUR, experts recommend adopting a ‘bucket strategy’. This involves keeping an amount equivalent to your 6 to 12 months’ expenses in a separate savings account or FD. The advantage of this is that in months when the market falls significantly, you can withdraw less from NPS and use the funds in your FD. This strategy protects you from market risks and increases the longevity of your investment.

Tax Rules and Final Decision

From a tax perspective, withdrawals up to 60% from NPS are completely tax-free, but any amount above this amount may be taxable according to your income tax slab. Consider your other income sources, such as rent or bank interest, when making your decision. If you have no other source of income, SLW should be your first choice. However, if you have the ability to withstand market fluctuations and want better returns over the long term, SUR can prove to be a strong option.

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