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NPS Withdrawal After 60: New Rules vs. Tax Reality - What You Need to Know!
M
Moneycontrol•27-09-2026, 19:34
NPS Withdrawal After 60: New Rules vs. Tax Reality - What You Need to Know!
- •New PFRDA rules allow 100% NPS corpus withdrawal if the amount is below Rs 8 lakh after age 60, a significant increase from the previous Rs 5 lakh limit.
- •Despite PFRDA's amended rules, the Income Tax Act, 1961, still exempts only 60% of the NPS corpus from tax, meaning the remaining 40% may be taxable.
- •Subscribers with a corpus between Rs 8 lakh and Rs 12 lakh must use at least Rs 6 lakh to buy an annuity, with the balance received tax-free.
- •If the NPS Tier I account exceeds Rs 12 lakh, 20% of the corpus must be used for an annuity, and the remaining 80% is tax-free.
- •The article highlights a discrepancy between PFRDA's enhanced withdrawal thresholds and the current income tax laws, suggesting future synchronization is expected.
Key Questions Answered
Following amendments by the PFRDA, subscribers whose NPS Tier 1 corpus does not exceed Rs 8 lakhs at the time of exit after reaching age 60 are allowed to withdraw 100 percent of the accumulated amount. This revised limit increased from the earlier threshold of Rs 5 lakhs.
No, despite the PFRDA allowing full withdrawal for corpuses up to Rs 8 lakhs, the Income Tax Act provides an exemption for only 60 percent of the NPS corpus. Consequently, subscribers who withdraw the full amount must still pay tax on 40 percent of the withdrawal.
If the accumulated NPS balance is between Rs 8 lakhs and Rs 12 lakhs, the subscriber is required to purchase an annuity of at least Rs 6 lakhs, while the remaining balance is received tax-free.
