Planning your financial future involves understanding the tools and options available for long-term savings. The National Pension Scheme (NPS) is a cornerstone of retirement planning in India, offering flexibility, tax benefits, and financial security.
Whether you’re approaching retirement, considering early withdrawal for pressing needs, or simply curious about how the NPS supports your goals, knowing the withdrawal rules is essential.
This guide provides a detailed walkthrough of the NPS withdrawal process in 2024, highlighting partial withdrawals, premature exits, rules upon superannuation, and provisions in case of unforeseen events.
Let’s uncover how you can make the most of your NPS savings while securing a worry-free retirement!
Unveiling: Types of NPS Withdrawal
1. Partial Withdrawal
Subscribers can withdraw a portion of their NPS savings before retirement for specific purposes.
Key Rules
- Up to 25% of the subscriber’s contributions (excluding employer contributions) can be withdrawn.
- Permitted purposes include:
- Children’s higher education or marriage
- Purchase or construction of a first home
- Medical treatment for critical illnesses
- Allowed only after three years of subscription.
- A maximum of three partial withdrawals is allowed during the subscription period.
Process
- Log in to the eNPS portal.
- Submit a request with supporting documents for the approved purpose.
- The amount will be credited directly to your account after verification.
Taxation
Partial withdrawals are tax-exempt under the current Income Tax laws.
2. Premature Withdrawal (Before Age 60)
Subscribers exiting the scheme before reaching 60 years are subject to specific conditions.
Key Rules
- If the corpus is ₹2.5 lakh or less, the entire amount can be withdrawn as a lump sum.
- For amounts exceeding ₹2.5 lakh, 80% of the corpus must be used to purchase an annuity, which provides a monthly pension.
- The remaining 20% can be withdrawn as a lump sum.
Process
- Submit a withdrawal request on the eNPS portal.
- Upload the required documents (KYC, bank details, and exit declaration).
- Funds will be disbursed based on the rules.
Taxation
Lump sum withdrawals are tax-exempt.
Annuity income is taxable as per your income slab.
3. Withdrawal at Age 60 or Superannuation
NPS subscribers have flexible options for utilizing their corpus upon retirement.
Key Rules
- Up to 60% of the corpus can be withdrawn as a lump sum, which is entirely tax-free.
- The remaining 40% must be used to purchase an annuity to ensure a steady pension.
- If the total corpus is ₹5 lakh or less, the entire amount can be withdrawn as a lump sum.
Process
- Submit an exit request online through the eNPS portal.
- Choose an annuity plan and provider.
- The corpus will be distributed as per your choice.
Taxation
- Lump sum withdrawals are tax-free.
- Pension received from the annuity is taxable as income slab
4. Withdrawal in Case of Death
In unfortunate cases, NPS allows legal heirs or nominees to claim the corpus with certain rules.
Key Rules
If the total corpus is ₹5 lakh or less: The nominee/legal heir can withdraw the entire amount as a lump sum.
For amounts above ₹5 lakh: 80% of the corpus must be used to purchase an annuity, and the remaining 20% can be withdrawn as a lump sum.
If no dependents (spouse or parents) are alive: 80% of the corpus is transferred to surviving children, or if no children, to the legal heirs.
Process
- Nominees must log in to the eNPS portal and submit a withdrawal request.
- Provide necessary documents, such as a death certificate, proof of identity, and relationship.
- Funds are distributed based on the applicable rules.
Taxation
- Lump sum withdrawals for nominees are tax-exempt.
- Pension income from the annuity is taxable.
Why Open an NPS Account with UTI Pension?
a) Trustworthy Fund Manager: UTI Pension is a trusted name, offering reliable service for your NPS investments.
b) Convenience: The online process saves you time and effort.
Don’t wait to secure your financial future! Visit the UTI Pension NPS Portal today and take the first step towards a worry-free retirement.
Steps to Open Your NPS Account
Step 1: Visit the UTI Pension Portal
Head over to UTI Pension’s official website https://www.utipension.com/open-nps-account . This is your starting point for setting up an account in just a few clicks.
Step 2 Provide Details: Enter your mobile number, Permanent Account Number (PAN), and email ID.
Step 3 Verify Your Identity: Confirm the OTP sent to your phone.
Step 4 Follow On-Screen Instructions: Complete the registration by following the instructions provided.
Step 5 Receive Your PRAN: After completing the process, you will receive your Permanent Retirement Account Number (PRAN), which you can use to log in to your NPS account.
Steps for NPS Withdrawal:
If you prefer offline, you can visit your nearest UTI branch for assistance:
Visit the UTI Pension Fund Office: Locate the nearest UTI Pension Fund branch and request a withdrawal form.
Complete and Submit the Form: Fill out the form, attach documents (identity proof, bank details), and submit it at the UTI Pension Fund branch. They will forward it to the NPS authorities for processing.
Both online and offline options ensure you have flexibility based on your preference.
Necessary Documents for NPS Withdrawal
When the time comes to withdraw, having the required documents ready can help streamline the process:
i) Withdrawal Form: Fill out the appropriate form based on your type of withdrawal.
ii) Identity Proof: A copy of PAN, Aadhaar, or any government-issued ID.
iii) Bank Details: A cancelled cheque or bank passbook for verification.
iv) Proof of Address: Such as a recent utility bill or bank statement.
v) Medical or Education Documents: For withdrawals related to medical treatment or education, attach supporting documents.
Preparedness with these documents ensures a smooth process, helping you access your funds efficiently.
Conclusion
The NPS is designed to support your retirement journey with tax-efficient savings and controlled flexibility. Whether it’s partial withdrawals, premature exits, or a structured exit at 60, the scheme allows you to handle life’s financial demands while securing your future. Knowing these rules equips you to make informed choices, creating a financially sound retirement path and enjoying the benefits of the NPS to the fullest.