For the benefit of the subscriber, PFRDA has taken a number of digital steps to mitigate delivery window for most of its operations and functions. Selective withdrawal has now been rendered digitally and paperless, which were formerly physically treated, PFRDA has now allowed NPS subscribers to fulfill their individual needs, in this era of digital transition. Subscribers under NPS can now make partial withdrawal of 25 percent of their self-contribution after 3 years of entering the scheme as authorized by PFRDA after 3 years of entering the system to satisfy their particular needs. Currently, in order to validate the factors for their partial withdrawals, the eligible subscribers need to address their application for partial withdrawal to the relevant nodal officers/Points of Presence (POPs) along with the supporting documents.
This initiative was undertaken by PFRDA to streamline the self-declaration-based partial withdrawal process and guarantee smoother payment of the partially withdrawn amount into the bank account of the subscriber. In the Central Record Keeping Agency (CRA) system, partial withdrawal applications are submitted electronically and are processed directly. Although the electronic withdrawal facility is approved, the current offline withdrawal facility shall continue and the subscribers still have the freedom to submit offline applications to the relevant POPs/Nodal officers.
The method of partial self-declaration-based withdrawal is given below:
- For online/off-line partial withdrawal subscribers can submit their application to CRA/Nodal Office/PoPs.
- You can sign in to the CRA system using the required credentials for making online withdrawal.
- Opt the 'Partial Withdrawal' option and appropriate partial withdrawal amount will be displayed on your device screen.
- For partial withdrawal select this 'Self Declaration' reason from the drop-down menu: "I submit the request for partial withdrawal and the amount thus withdrawn shall be utilized for the purpose of declared reasons as specified by PFRDA exit regulations. I am fully responsible and accountable to spend the amount thus withdrawn for the stated reason".
- Confirm the Non-Editable Bank Account Number
- In the case of online mode, you need to update your email and mobile number to validate using OTPs.
- Instant Bank Account Authentication" by penny drop, CRA implements partial withdrawal update."
- On the T+4th working day, the subscriber will receive the amount. T is the date of the subscriber's online submission / approval in offline mode through Nodal Office/POP.
- There is no need to submit any relevant documents in offline or online format
Withdrawal rules for NPS partial withdrawal
Partial withdrawal will be approved for the care of emergency condition of a subscriber under NPS as confirmed by Pension Fund Regulatory and Development Authority of India (PFRDA). The other partial withdrawal guidelines from NPS are still the same. To make a partial withdrawal from your NPS account the below given 5 facts must need to be taken into consideration:
- In specific conditions NPS subscribers can render a partial withdrawal after three years from the date of joining under the scheme.
- Partial withdrawal is approved for children's higher education/marriage expenditures, residential house purchase/construction (under prescribed conditions) and medication of vital diseases.
- During the overall subscription period under NPS, the subscriber can make a partial withdrawal not more than three times.
- On the date of request for withdrawal the maximum permitted cap for partial withdrawal is 25% of the contributions rendered by the subscriber.
- NPS subscribers can submit a partial withdrawal application online. Optionally, the subscriber can also submit to Point of Presence service providers a physical partial withdrawal form along with supporting documents on the basis of which the POP can trigger an online submission. The Nodal Office/PoPs/Aggregators would confirm that the subscriber has issued the medical certificate and the formal request for partial withdrawal in the event of partial withdrawal as per PFRDA.
Taxation on withdrawal from NPS
Let's talk about the tax treatment on withdrawal from NPS account based on various conditions:
Withdrawal at the time of retirement: Up to 40 percent of the overall capital of the NPS are exempted from tax at the time of retirement. That being said, the maximum amount that you can withdraw at retirement is 60% of the accrued capital and 40 percent of the remainder has to be used for the acquisition of the subscriber's annual pension annuity.
In case of withdrawal before retirement/age of 60: If you wish to withdraw from NPS before the age of 60 or before retirement (other than the reason stated for partial withdrawal), the withdrawn balance is not taxable respectively. Although the amount that can be withdrawn is restricted to only 20% of the total wealth in NPS and 80% of the accumulated pension fund must be used for the purchase of annuity allowing for monthly pension. The annuity benefit shall, therefore, be taxable in the year of withdrawal in compliance with the slab rate applied to the subscriber.
In case of death of the subscriber: In the case of the subscriber's death the amount withdrawn is exempted from tax. The overall accrued pension would be paid to the subscriber's legitimate heir/nominee. That being said, in the case of government workers, it is not possible to withdraw the entire amount. The purchase of an annuity plan by the nominee is compulsory.
In case of withdrawal in full at the time of retirement: If the overall amount in the account is less than Rs. 2 Lakhs as at the time of retirement (for government employee)/attaining the age of 60 (private employee), the possibility of full withdrawal can be used by the subscriber (other than Swavalamban subscribers).