NPS SAVING SCHEME: Being related to retirement planning, the main objective of the National Pension System is to arrange pensions after retirement.
But sometimes investors have to withdraw money from the retirement corpus for their needs. Keeping this in mind, partial withdrawal and pre-mature exit have been made in the rules of NPS.
NPS Tier 1 and Tier 2 accounts
Tier 1 (Tier-I) and Tier 2 (Tier-II). Out of this, the Tier 1 account is the primary retirement account of this scheme i.e. the main account for retirement planning, while the main objective of the Tier 2 account is to provide investors a better means of investment for returns.
Every investor must open a Tier 1 account, only after that Tier 2 account can be opened. There is no restriction on the withdrawal of money from a Tier 2 account, but the withdrawal of money from a Tier 1 account can be done only under certain terms and conditions.
Partial withdrawal after 5 years
Partial withdrawal of funds deposited in the Tier 1 account of NPS is allowed after 5 years under certain conditions. After 3 years, you can withdraw a maximum of 25 percent of the amount deposited by you in the Tier 1 account of NPS.
This amount does not include the return on investment and any contribution made by the employer. Such partial withdrawals can be made only a maximum of 3 times during the entire tenure of the investment. This exemption for partial withdrawal can be made for the following specific purposes.
For the treatment of illness or in case of any disability.
For children’s education or marriage.
To buy or build a house.
To start a new business.
To meet your skill development needs.
Premature Exit or Complete Withdrawal
You can exit the scheme by withdrawing the entire fund deposited in NPS even before the completion of the maturity age of 60 years. But this is allowed only under certain special circumstances and conditions.
Pre-mature exit from NPS can be allowed only after completion of 5 years from account opening.
If the total corpus is Rs 2.5 lakh or less, there is an option to withdraw the entire amount in one go.
If the total amount deposited in the corpus is more than Rs 2.5 lakh, then it is necessary to invest 80 percent of it in buying an annuity, from which you will get a regular pension. The remaining 20 percent amount can be withdrawn in a lump sum.
Exit on maturity
The maturity of NPS is when the subscriber turns 60 years of age, after which exit from the scheme is allowed. Some rules have been fixed for this also.
If the total amount deposited in the Tier 1 account of NPS at the time of maturity is Rs 5 lakh or less, then investors can withdraw the entire amount in one go.
If at the time of maturity, the total amount deposited in the Tier 1 account of NPS is more than Rs 5 lakh, a maximum of 60 percent of it can be withdrawn in lump sum.
To get a pension from the remaining 40 percent amount, it is necessary to take an annuity. If the subscriber wishes, he can invest more part of the corpus to buy an annuity.