All about NPS partial withdrawal during COVID-19

NPS is a government-backed pension scheme that was launched in 2004 for employees in the government sector. It was later broadened to include employees of all sectors, including unorganized sector in 2009.

May 28, 2020 12:05 IST India Infoline News Service

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The Coronavirus pandemic has affected everyone at various levels. In a bid to ease some of the hardships faced by its subscribers, the Pension Fund Regulatory Development Authority of India (PFRDA) has allowed account holders to make partial withdrawals from the National Pension System (NPS). The partial withdrawal of funds from the NPS accounts is allowed or meeting expenses related to the treatment of COVID-19.

NPS is a government-backed pension scheme that was launched in 2004 for employees in government sector. It was later broadened to include employees of all sectors, including unorganized sector in 2009. It was initiated under the PFRDA to take the citizens under the affordable social security scheme. The minimum contribution by an employee towards NPS is Rs6,000, with no capping on the upper level. NPS enables the subscribers to set their own choice for fund allocation to different asset classes such as government bonds, equity market instruments and
corporate debt.

The government offers two types of accounts under the National Pension System i.e. Tier 1 and Tier 2. While the Tier I NPS account is a pension account, the Tier II NPS account is a savings account. Under Tier II NPS, the policy holder can deposit savings and can withdraw money. However, no withdrawal from Tier I is allowed until the account holder crosses the age limit of 60 years. In specified cases, partial withdrawal can be made.

Here are few things you should know about the partial withdrawal:
  • The NPS subscribers can make partial withdrawal after 3 years from the date of joining the system under specific circumstances.
  • The partial withdrawals shall be permitted to fulfil financial needs of the subscribers, if required to him/her against the request placed for partial withdrawals towards treatment of the illness of subscriber, his legally wedded spouse, children, including a legally adopted child or dependent parents, as per the regulations, PFRDA said in the circular earlier this month. The other rules for partial withdrawal from NPS remain the same. To make the withdrawal, you will need to produce a medical certificate along with the partial withdrawal request.
  • Under Rule (8) of the regulations, a partial withdrawal of accumulated pension wealth of the subscriber, not exceeding 25% of the contributions made by the subscriber and excluding contribution made by the employer, if any, at any time before exit from National Pension System is allowed. Previously, this was allowed only for higher education of children, their marriage, construction or purchase of a residential house or flat, for treatment of specified illness.
  • Partial withdrawal request can be made online by the NPS subscriber. Alternatively, the subscriber can also submit physical partial withdrawal form along with documents to Point of Presence service providers, based on which POP can initiate online request. In case of making partial withdrawal towards treatment for coronavirus the subscriber has to provide the medical certificate and formal request for partial withdrawal.
  • In case the subscribers choose the online mode, they are required to log into their NPS account using your 12-digit Permanent Retirement Account Number (PRAN) and password to initiate an exit request.
  • They can also check the NPS withdrawal status under the menu 'Exit Withdrawal Request'.
  • The subscriber can make a partial withdrawal a maximum of 3 times during the entire tenure of subscription under NPS.
  • Apart from the withdrawal purposes mentioned above, the remaining conditions for partial withdrawal from NPS remains same as mentioned under regulation 8 of the PFRDA (Exits and withdrawals under NPS) Regulations, 2015 and amendments thereafter.
  • Under the existing rules of the national pension system, these partial withdrawals are completely tax-free.

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