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NPS withdrawal rules: It's important to understand the rules before withdrawing money from NPS. Learn about the rules for maturity and partial withdrawals, the five mistakes to avoid, and the specific circumstances under which you can withdraw money from your NPS account. Yes, with the right information, you can save on taxes and avoid application rejections.

How to Withdraw from NPS?
If you're investing in the National Pension System (NPS) for your retirement planning, this news is very useful. It's often seen that people try to withdraw money from NPS when needed, but due to a lack of knowledge of the correct rules, their applications are rejected, or they suffer significant tax losses. So today, we'll explain the correct method for withdrawing money from NPS and the mistakes you should avoid.

Important Rules for Withdrawing from NPS
NPS is a long-term investment, so there are strict rules for withdrawing money from it. You can withdraw money in two situations: first, at maturity (after age 60), which means you can withdraw 60% of the total deposit at once, which is completely tax-free. With the remaining 40%, you must purchase an annuity, which provides you with a monthly pension. Second, premature withdrawal (Partial Withdrawal), which means you can withdraw money only in certain circumstances (such as children's education, marriage, home construction, or serious illness).

Don't Make Mistakes
But whether you withdraw money at maturity or prematurely, people often make mistakes that can impact their funds. So, let's explore the mistakes one should avoid when withdrawing money.

Mistake 1: Trying to withdraw the entire amount prematurely
Many people think they can withdraw the entire amount at any time. However, according to the rules, you can only make partial withdrawals after three years of account opening. That too, only 25% of your contributions can be withdrawn.

Mistake Two: Not Understanding Withdrawal Limits
You can only make partial withdrawals three times during your entire service period. So, if you repeatedly apply for small needs, you will lose this option in the future when you have a bigger need.

Mistake Three: Not Updating Bank Details and KYC
Most withdrawal applications get stuck due to incorrect bank account information or a lack of KYC (Aadhaar-PAN linking). Before applying, ensure that your PRAN card details match your bank account.

Mistake Four: Ignoring Tax Benefits
While 60% of your retirement money is tax-free, the monthly pension from the 40% you use to purchase an annuity plan is not tax-free. Your pension will be added to your annual income and taxed according to your tax slab. This should be planned.

Mistake Five: Rushing into annuity selection
In fact, at retirement (age 60), you can withdraw 60% of your funds and must choose a pension plan for 40%. People often make the mistake of choosing an annuity plan without researching it. Therefore, carefully consider the 'Annuity with Return of Premium' option. This option returns the original amount to your family after your death. Yes, be sure to compare pension rates from different companies, as once you choose a plan, you cannot change it.

Easy Withdrawal Process
To withdraw funds, first visit the website of your respective CRA (such as NSDL or KFintech) and log in with your PRAN and password. Select the Transact Online option in the menu, then click on Withdrawal, and select Partial Withdrawal or Exit on Maturity. You'll need to upload the relevant documents and a canceled check. An OTP will then be sent to your registered mobile number and email address. Entering this information will confirm your application submission. After the online process, your office or the relevant bank (POP) will digitally verify the withdrawal, after which the funds will be credited directly to your bank account.

Understand PFRDA Rules
PFRDA has established clear rules for premature partial withdrawal from the National Pension System (NPS). You can withdraw up to 25% of your contribution only under specific circumstances, such as for children's higher education, their marriage, or buying or building a house.

Things to keep in mind when withdrawing money:
Your NPS account must be at least 3 years old to withdraw funds. You can only withdraw 25% of your contribution (Employee Contribution). Yes, the government or company contribution (Employer Contribution) cannot be withdrawn. Therefore, you can make partial withdrawals only 3 times during the entire period (until retirement). There must be a gap of at least 5 years between two withdrawals (this rule does not apply in case of a medical emergency).

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.