NPS Withdrawal Rules in 2025 — What Changed and What You Need to Know

Part 4 of 4 — Withdrawals & Exit Rules

Everything You Need to Know — Including the Major December 2025 Changes

Overview

For years, the most common criticism of NPS was its rigidity — money locked until 60, a forced annuity requirement, and limited withdrawal options. That changed dramatically in December 2025, when PFRDA notified sweeping amendments to the PFRDA (Exits and Withdrawals under NPS) Regulations.

This part covers the complete picture of how and when you can access your NPS money — contributions while invested, at retirement, and in special situations.

Important: New Terminology

The December 2025 regulations introduced updated official terms. You may see both used across different documents:

Three Types of Access to Your NPS Money

1. Partial Withdrawal — while you are still invested (before exit)

2. Normal Exit — at retirement (age 60 or as applicable)

3. Premature Exit — before the normal exit age

1. Partial Withdrawal (While Still Invested)

Partial withdrawal allows you to access a portion of your NPS savings for specific purposes before you exit the scheme entirely.

Updated Rules (Post December 2025)

Permitted Purposes for Partial Withdrawal

• Higher education of self or children

• Marriage of self or children

• Purchase or construction of a residential house (if subscriber does not already own one; ancestral property excluded)

• Treatment of specified critical illnesses or medical hospitalisation (definition now broadened — not limited to a fixed list)

• Permanent disability (75% or above)

• Repayment of a loan taken against the NPS account from a PFRDA-regulated institution

A new addition in the 2025 rules: subscribers can now take a loan against their NPS balance from regulated institutions. Partial withdrawal to repay such loans is now a permitted purpose.

2. Normal Exit at Retirement

Who It Applies To

Normal exit applies when you reach the standard retirement age — 60 years for most non-government subscribers, or superannuation age for government employees.

New Rules for Non-Government Subscribers (All Citizens & Corporate Model)

This is where the December 2025 changes are most significant.

If Your Corpus (APW) is ₹8 Lakh or Below

You can withdraw 100% as a lump sum. No annuity purchase required. Previously, this threshold was ₹5 lakh.

If Your Corpus is Between ₹8 Lakh and ₹12 Lakh

You can withdraw up to ₹6 lakh as a lump sum. The remaining balance can be:

• Used to purchase an annuity, or

• Withdrawn through Systematic Unit Redemption (SUR) — a new structured withdrawal option over a minimum of 6 years (similar to SWP in mutual funds)

If Your Corpus Exceeds ₹12 Lakh

• Up to 80% can be withdrawn as a lump sum (previously 60%)

• At least 20% must be used to purchase an annuity (previously 40%)

Normal Exit Summary — Non-Government Subscribers

Rules for Government Subscribers

Government employee rules have been partially updated but retain a more conservative structure:

3. Premature Exit (Before Age 60)

Premature exit applies when you choose to leave NPS before reaching the normal retirement age.

For Non-Government Subscribers (All Citizens & Corporate Model)

Key update: The mandatory 5-year lock-in before premature exit has been completely removed under the 2025 rules. Previously, you had to be invested for at least 5 years before you could even apply for premature exit. This restriction no longer applies.

For Government Subscribers Who Resign or Are Removed

The exit is treated as premature:

4. Extended Age — Entry and Exit Now at 85

One of the biggest structural changes in 2025 is the extension of the maximum entry and exit age.

This means:

• You can now join NPS up to age 85

• You can stay invested in NPS until age 85

• You can defer annuity purchase and lump sum withdrawal until age 85

For those joining after age 60, the previous mandatory 3-year stay requirement before exit has also been removed under the new rules.

5. Normal Exit — New Option: 15-Year Rule (Non-Government)

For non-government subscribers, the 2025 rules introduce a new pathway: you can opt for normal exit after completing 15 years of NPS subscription, even before reaching age 60, subject to applicable withdrawal rules.

For example, if you start NPS at age 30, you become eligible for normal exit at 45. The standard lump sum and annuity rules for normal exit apply.

6. Systematic Withdrawal Options

Beyond lump sum and annuity, the 2025 rules introduce two new structured withdrawal methods:

SLW — Systematic Lump Sum Withdrawal

Allows you to withdraw your NPS corpus in periodic instalments (monthly, quarterly, half-yearly, or annually) while keeping the remaining balance invested and growing.

SUR — Systematic Unit Redemption

Allows you to redeem a fixed number of NPS units periodically, giving steady income while the remaining units stay market-linked. Minimum duration: 6 years.

These options give retirees a middle ground between taking everything at once and locking everything into an annuity.

7. What Is an Annuity?

When you exit NPS, you are required to use a portion of your corpus to purchase an annuity from a PFRDA-registered Annuity Service Provider (ASP) — typically a life insurance company.

An annuity converts your lump sum into a regular monthly income for life (and optionally for your spouse's lifetime too, depending on the annuity plan chosen).

You choose the annuity type, frequency (monthly/quarterly/annual), and whether to include a return of purchase price to nominees. Once purchased, annuity income is taxable as per your income tax slab.

List of Annuity Service Providers is available at npstrust.org.in.

8. Death of Subscriber

If a subscriber passes away before retirement, the rules ensure financial protection for the family.

Nominees are strongly encouraged to be registered and kept up to date in the CRA system.

Tax on NPS Withdrawals

Important: The PFRDA has allowed up to 80% lump sum withdrawal, but the Income Tax Act, 1961, currently exempts only 60%. The additional 20% remains taxable until the Ministry of Finance issues a corresponding tax exemption. Monitor budget announcements for updates.

Summary of All Exit Rules

Quick Reference — What Changed in December 2025

Summary

NPS withdrawals have undergone a complete transformation in 2025. The scheme now offers significantly more flexibility — lower mandatory annuity, higher lump sum access, removal of the 5-year premature exit lock-in, new systematic withdrawal modes, and an extended investment horizon to age 85. For non-government subscribers especially, NPS has become far more liquid and subscriber-friendly than it was even a year ago.

Plan your exit strategy early. Decide between lump sum, SLW, SUR, and annuity combinations based on your retirement income needs, tax situation, and corpus size.

This concludes the 4-part Complete Guide to NPS.

Pervious Series Index:

• Part 1 — What is NPS and How Does It Actually Work?

• Part 2 — Who Can Join NPS? Rules for Resident Indians, NRIs, OCIs & Minors

• Part 3 — Where Does Your NPS Money Go? Schemes, Funds & the New MSF Framework Explained

Source: PFRDA, NPS Trust (npstrust.org.in), PFRDA (Exits and Withdrawals) Amendment Regulations 2025 (gazetted December 16, 2025). Data accurate as of April 2026.