NPS Withdrawal Rules 2026: Partial Withdrawal, Exit, Lump Sum and Annuity Explained

Written by Finnovate

Content Team

NPS withdrawal rules determine when and how a subscriber can access money accumulated in a National Pension System Tier I account.

A withdrawal may happen at retirement, through a premature exit, as a partial withdrawal while the account remains active, after the subscriber’s death, or through approved systematic payout options.

The NPS rules changed significantly after amendments notified by the Pension Fund Regulatory and Development Authority in December 2025. One of the most important changes applies to eligible non-government subscribers, who may now withdraw up to 80% of their accumulated pension wealth at normal exit, subject to the applicable corpus limits and annuity requirements.

Government-sector subscribers continue to follow the 60% lump-sum and 40% annuity structure for larger NPS corpuses.

This article explains the NPS withdrawal rules applicable in 2026, including normal withdrawal, premature exit, partial withdrawal, small-corpus withdrawal, annuity requirements, death claims, systematic payouts, continuation and taxation.

NPS Withdrawal Rules 2026 at a Glance

Types of NPS Withdrawals

NPS withdrawal is a broad term. It includes withdrawals that close the Tier I account as well as partial withdrawals that allow the account to remain active.

What Is the Difference Between NPS Withdrawal and Exit?

An NPS exit means closing the subscriber’s Tier I individual pension account and settling the accumulated pension wealth.

Where the Tier I account is being closed, the NPS rules broadly recognise three exit situations:

1. Normal exit
2. Premature exit
3. Exit following the subscriber’s death

Normal NPS Withdrawal Rules in 2026

The point at which an exit becomes a normal exit depends on the subscriber category.

All Citizen NPS subscribers

For an individual who joined NPS before age 60, normal exit is available on:

• Completing 15 years under NPS, or
• Attaining 60 years of age,

whichever happens earlier.

Corporate NPS subscribers

For Corporate-sector subscribers, normal exit generally applies on reaching the retirement or superannuation age prescribed under the employer’s service rules or employment terms.

Government-sector subscribers

Normal exit ordinarily applies when a Government subscriber reaches the applicable superannuation age.

Normal-exit treatment may also apply in certain cases of invalidation, disability or premature retirement when certified under the relevant service rules. Additional provisions apply to Central Government employees governed by the Central Civil Services NPS Rules.

Normal NPS Withdrawal Rules for Non-Government Subscribers

This category includes:

• All Citizen Model subscribers
• Corporate-sector subscribers
• Subscribers under applicable common schemes
• Subscribers covered by the Multiple Scheme Framework

When the NPS corpus is up to ₹8 lakh

The amount may be received through:

• A single lump-sum payment
• Systematic Lump-sum Withdrawal
• Systematic Unit Redemption

When the corpus is above ₹8 lakh but not more than ₹12 lakh

When the corpus is above ₹12 lakh

The remaining amount, up to 80%, can be received as:

• A lump sum
• Systematic Lump-sum Withdrawal
• Systematic Unit Redemption
• Another payout method approved by PFRDA

These revised provisions replaced the earlier rule under which non-government subscribers generally had to use at least 40% of the corpus for an annuity.

Normal NPS Withdrawal Rules for Government Employees

The basic annuity requirement for Government subscribers has not changed for larger corpuses.

NPS Withdrawal Rules for Subscribers Who Joined at or After Age 60

Subscribers who join the All Citizen NPS model at age 60 or later can exercise normal exit at any time.

The earlier three-year vesting requirement has been removed. Premature-exit provisions consequently do not apply to this category.

Premature NPS Withdrawal Rules in 2026

An exit is treated as premature when a subscriber closes the account before becoming eligible for normal exit.

For a non-government subscriber who joined before age 60, this generally means exiting before:

• Completing 15 years of subscription
• Attaining age 60
• Reaching the applicable retirement or superannuation age

For Government-sector subscribers, resignation, voluntary closure, dismissal or removal from service may result in premature-exit treatment, subject to the applicable service rules.

The earlier five-year minimum lock-in for premature exit under the All Citizen Model has been removed. However, the premature-exit annuity requirement continues to apply where the corpus exceeds the small-corpus limit.

Corpus Limits for Premature NPS Withdrawal

A premature exit can therefore provide much less immediate liquidity than a normal exit.

NPS Withdrawal Rules After the Subscriber’s Death

The death-claim provisions differ between Government and non-government subscribers.

Death of a non-government subscriber

For an All Citizen or Corporate-sector subscriber, the entire accumulated pension wealth is payable to the nominee or legal heirs.

They may choose:

• Full lump-sum payment
• Systematic Lump-sum Withdrawal
• Systematic Unit Redemption
• An annuity

An annuity is optional, irrespective of the size of the corpus.

Death of a Government-sector subscriber

For a Government-sector corpus above ₹12 lakh, eligible family members are considered in the following order:

1. Spouse
2. Mother
3. Father

Where none of these eligible family members is alive, the annuity portion may be returned to the surviving children or, in their absence, the legal heirs.

Can You Continue NPS After Age 60?

Yes. A subscriber who does not exit at age 60 or superannuation may continue under NPS up to age 85 under the revised framework.

For a non-government subscriber, continuation can happen automatically where no exit request is submitted. A Corporate account connected to an employer may be shifted to the All Citizen Model after the employment relationship ends.

During the continuation period, the subscriber may generally:

• Continue contributing
• Change the pension fund
• Change asset allocation
• Use the CRA account facilities
• Exit later under the applicable rules

The earlier requirement to provide 15 days’ advance notice for continuation or deferment was removed by the amended regulations.

Continuation and Deferment Are Not the Same

A subscriber may defer:

• Lump-sum withdrawal up to age 85
• Annuity purchase up to age 85
• Both lump-sum withdrawal and annuity purchase

Once continuation has been selected, the separate deferment options may not remain available in the same manner.

What Are SLW and SUR?

The revised NPS rules provide more ways to receive money instead of taking the entire eligible amount at once.

NPS Partial Withdrawal Rules in 2026

A partial withdrawal does not close the NPS account.

A subscriber becomes eligible after completing at least three years under NPS.

Permitted purposes include:

• Children’s higher education
• Children’s marriage
• Purchase or construction of an eligible residential house
• Medical treatment or hospitalisation
• Expenses arising from disability or incapacitation
• Settlement of an eligible financial obligation against a lien or charge on the NPS account

Tax on NPS Withdrawal in 2026

The exit regulations and the income-tax exemption are not identical.

Under the current income-tax provisions, an amount of up to 60% of the total NPS corpus payable on closure or opting out is exempt under the applicable NPS withdrawal provision. Eligible partial withdrawals are exempt up to 25% of the subscriber’s contributions, subject to the prescribed conditions.

Therefore, the part of a lump-sum withdrawal exceeding the statutory 60% exemption may have tax implications. Subscribers considering an 80% withdrawal should check the tax treatment applicable in the year of exit instead of assuming that the full 80% will be tax-free.

Tax treatment of the annuity portion

The amount used directly to purchase the annuity is generally not taxed at the time of annuity purchase.

However, pension received from the annuity is normally taxable in the year of receipt according to the subscriber’s applicable tax provisions.

Tax rules may change independently of PFRDA’s exit regulations. Professional tax advice may be required where the withdrawal exceeds 60%, periodic redemptions are selected or the subscriber is an NRI.

How to Withdraw Money From NPS

The exact process depends on the subscriber’s CRA, sector and mode of account opening.

A withdrawal or exit request can generally be initiated through:

• The subscriber’s CRA portal
• The associated Point of Presence
• The employer or Government nodal office
• An authorised NPS intermediary

Typical documents and details required

• PRAN details
• Verified bank account
• PAN and KYC information
• Proof of retirement or superannuation, where applicable
• Nominee and annuity details
• Annuity Service Provider selection
• Exit or withdrawal form
• Supporting documents for death claims

Common Mistakes to Avoid When Withdrawing From NPS

Conclusion

The NPS withdrawal rules applicable in 2026 provide different options depending on whether the subscriber is making a partial withdrawal, taking benefits at normal exit, closing the account prematurely or claiming the corpus after death.

The revised framework provides greater withdrawal flexibility, particularly for eligible All Citizen and Corporate subscribers. However, the amount available as a lump sum, the mandatory annuity allocation and the tax treatment depend on the subscriber category, corpus and reason for withdrawal.

The main changes include:

• Normal exit after 15 years for All Citizen subscribers
• Up to 80% lump-sum withdrawal for eligible non-government subscribers
• Full withdrawal for a normal-exit corpus of up to ₹8 lakh
• Full withdrawal for a premature-exit corpus of up to ₹5 lakh
• Removal of the three-year vesting period for subscribers joining at or after age 60
• Continuation and deferment options up to age 85
• Wider use of systematic and periodic-payout options

However, a higher permitted lump-sum withdrawal is not automatically the best retirement decision. It is also not necessarily fully tax-free. Before exiting, subscribers should compare the immediate cash requirement, tax impact, annuity income, investment risk and expected retirement expenses.

FAQs

1. Can I withdraw 100% of my NPS corpus in 2026?

Yes, where the corpus falls within the applicable small-corpus limit, such as up to ₹8 lakh at normal exit or up to ₹5 lakh at premature exit.

2. Is 40% annuity still compulsory under NPS?

For Government subscribers with a normal-exit corpus above ₹12 lakh, yes. Eligible non-government subscribers generally need a minimum 20% annuity.

3. Can an All Citizen subscriber exit after 15 years?

Yes. Normal exit is available after 15 years or at age 60, whichever is earlier.

4. Is there still a five-year lock-in before premature exit?

No. The five-year minimum was removed, but the 80% annuity rule still applies when a premature-exit corpus exceeds ₹5 lakh.

5. Is the entire 80% NPS withdrawal tax-free?

Not necessarily. Current tax provisions specify an exemption up to 60% of the total amount payable on closure or opting out.

6. Can I keep my NPS account after retirement?

Yes. Eligible subscribers may continue the account up to age 85.

7. Can nominees take the entire NPS corpus after death?

For non-government subscribers, generally yes. Government-sector death claims follow separate corpus-based rules.

Disclaimer: This article is for general information and educational purposes only. It does not constitute tax, legal, retirement-planning or investment advice. NPS regulations, tax provisions and operational procedures may change. The correct treatment depends on the subscriber category, corpus, reason for exit, service rules and tax position. Please verify the latest PFRDA, NPS Trust, CRA and Income Tax Department provisions or consult a qualified professional before acting.