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National Pension System (NPS) is the best option to save for post-retirement expenses. This is a government scheme, so it is completely safe to invest in it. By investing in it, a big fund is created in the long run, which is very useful after retirement. Apart from this, there is also regular income in the form of pension every month.
But, these benefits are available after the customer turns 60 years of age. That is why many people do not invest in NPS, because they feel that if they need money in between, then the money deposited in NPS will be of no use to them. But, this is not true. Withdrawal from NPS is allowed even before the subscriber turns 60 years of age. Let us know what are the terms and conditions for this.
1. Partial Withdrawal
The customer is allowed to withdraw some money only after three years of opening the NPS account. The condition is that the customer can withdraw 25 percent of his total contribution. This will not include employer's contribution. PFRDA has allowed withdrawal of 25 percent contribution in certain circumstances.
-Higher education: The customer can withdraw funds for his or her children's higher education.
-Marriage: The customer can withdraw this amount for his own or his children's marriage.
-Buying a home: If the customer does not own a house, he can withdraw money to buy a house.
– To treat: The customer can withdraw money for the treatment of himself, his wife/husband or children. But, this money can be withdrawn only for the treatment of serious diseases like cancer, kidney and heart disease.
It is important to note that the subscriber is allowed three partial withdrawals during the period of NPS. There should be a gap of at least 5 years between one withdrawal and the next.
2. Premature Withdrawal (Withdrawal before age 60)
If for some reason a customer wants to withdraw money from NPS before the age of 60 years, then he can withdraw the money even after 10 years of opening the account. But, there are some conditions for this.
-80 percent of the amount should be used to purchase annuity. You will get pension every month from this annuity.
-A lump sum withdrawal of 20 percent of the corpus i.e. the total ready fund is allowed.
This means that if the subscriber wants to withdraw his money after 10 years, he will have to use 80 percent of the total corpus to buy annuity. With this he will get pension every month, which is the main objective of investing in NPS.
3. Exit on death before 60 years
If the subscriber dies before the age of 60 years, his nominee or legal heir can withdraw the entire amount deposited in NPS in lump sum. In such a situation there is no need to buy annuity. With this, the subscriber's family gets the entire amount in lump sum.
4. How much tax will be levied?
It is important to understand the tax rules applicable to premature withdrawal. Partial withdrawal i.e. up to 25 percent of the NPS corpus is tax free. If the subscriber wants to withdraw the entire amount before the stipulated time, then a lump sum tax of 20 percent of the amount will be charged. Keep in mind that if the entire amount is withdrawn prematurely, only 20 percent of the money is allowed to be withdrawn in lump sum. You will have to buy annuity with the remaining money. The pension received from annuity will be taxed as per the income tax slab of the subscriber.
From the above rules for withdrawal before attaining the age of 60 years it is clear that PFRDA has allowed the customer to withdraw the money as and when required. But, it also keeps in mind that the main objective of the customer to invest in NPS should be to receive a regulated income after retirement.