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Have any news updates ever impacted your life, savings, or investment strategy? If so, it’s a positive sign that you stay informed about market trends and developments. This blog also provides an update on how changes to National Pension System (NPS) withdrawal guidelines starting from February 2024 could potentially affect your retirement plans.
What are the updated guidelines for making partial withdrawals? What should you remember? Is it a good option to go for a partial withdrawal or not? We will discuss all of these in this blog.
National Pension System
The National Pension System (NPS) is a retirement scheme for Indian citizens. It is a good scheme for those who are willing to plan their retirement and have a lower risk tolerance when it comes to investing. Want to know how NPS is better than any traditional savings scheme? Read here
What are the new rules for partial withdrawals from NPS?
An NPS subscriber may withdraw partially from his/her account after a three-year period. But it has to be kept in mind that there is a limit on the withdrawal amount. According to the master circular issued by the Pension Fund Regulatory and Development Authority (PFRDA) on January 12, 2024, an NPS account holder may withdraw up to 25% of his contributions. The employer-contributed portion of the corpus cannot be withdrawn. Additionally, a partial withdrawal of the returns generated by the contributions will not be permitted.
Let’s understand with an example. If you have invested ₹5 lakhs in NPS and your corpus is around ₹10 lakhs, then you are allowed to withdraw 25% of your contributions, not the entire corpus. So 25% of ₹5 lakh is ₹1,25,000, which is the maximum you can partially withdraw.
How many times in NPS is a partial withdrawal permitted?
Withdrawals from your NPS account are limited to a total of three times over the account’s duration, with a mandatory five-year gap between each withdrawal. However, this five-year gap condition is waived if the withdrawal is for medical treatment of a specific ailment.
Having covered the rules and criteria for partial withdrawal, let’s now explore the reasons that are taken into consideration for NPS partial withdrawal.
National Pension Scheme: Partial Withdrawal Reasons
Withdrawal from NPS is allowed under certain conditions only. What are they? Let’s learn them one by one, briefly.
- Higher education for your child: If your child is willing to go abroad for higher education or he/she wants to pursue the course in India itself, then you are allowed to withdraw your contribution.
- Marriage of your child: You can also withdraw contributions to prepare for the wedding of your child.
- Chronic illness and disease: In certain circumstances, when someone suffers from a chronic disease like heart or kidney failure, you are allowed to take a partial withdrawal.
Conclusion
It is always fruitful when you stay updated and know the terms and conditions of a particular investment plan. Making sure that you take the time to understand the intricacies of NPS and devise a comprehensive strategy beforehand can help in a more secure financial future. Get started here.
