NPS Partial Withdrawal: Rules, Conditions & When It Makes Sense (2026 Guide)
- Buragadda Praneet
- 2 days ago
- 7 min read
Contents
1. “I Need Money, But I Don’t Want to Close My NPS”
Many NPS subscribers reach a point where they need money urgently but do not want to damage the retirement they have spent years building.
This moment is often emotionally heavier than it appears on paper. NPS is not treated like a savings account. It represents discipline, long-term thinking, and in many cases, decades of consistent contributions. Touching it can feel like breaking a promise made to your future self.
This situation is far more common than most people are willing to admit. It typically arises due to:
A child’s higher education or marriage expenses, which arrive at fixed life stages and rarely wait for perfect financial timing
A sudden medical or hospital emergency that requires immediate liquidity
Buying or constructing a first home, where upfront payments cannot be postponed
A temporary cash crunch caused by timing mismatches is not a permanent financial failure
What holds most subscribers back is a single fear:
“If I touch my NPS, will my retirement be ruined?”
The reality is far calmer and far more structured than this fear suggests.
NPS partial withdrawal exists precisely for such moments to provide liquidity without forcing you to exit NPS or permanently compromise your pension. It is not an exception or a loophole. It is a deliberately designed feature of the system.
2. What NPS Partial Withdrawal Actually Means
An NPS partial withdrawal is not an exit.
This distinction is critical and often misunderstood. Partial withdrawal does not signal the end of your retirement journey. It is a regulated mechanism that allows limited access to your own contributions while preserving the NPS account and its long-term benefits.
In practical terms:
Your NPS account remains active.
Your retirement and pension benefits continue without reset or penalty.
You withdraw only a capped portion of eligible funds.
The remaining corpus continues to grow and compound in the market.
Simple Understanding
Action | What It Does | Long-Term Impact |
Partial Withdrawal | Provides temporary liquidity | Minimal impact on pension |
Premature Exit | Closes NPS permanently | Major pension reduction |
The design intent is clear.
Key takeaway: If your requirement is temporary, partial withdrawal is the intended solution under NPS rules, not premature exit.
3. Who Is Eligible for NPS Partial Withdrawal
Partial withdrawal is conditional, not automatic.
You may be eligible only if all of the following conditions are satisfied:
Your NPS Tier-I account is active at the time of request.
You have completed the minimum required tenure, generally three years, counted from the date of first contribution.
You belong to one of the recognised subscriber categories:
Government
Corporate
All Citizens (Individuals)
Important Clarification
Eligibility depends on structural factors, not intent alone.
It is determined by:
Account status (active vs frozen)
Contribution history recorded with the CRA
Tenure completion at the time of request
It does not depend solely on the reason for which you need money. Even a valid reason will fail if tenure or account conditions are not met.
If your NPS account is "Frozen" or "Inactive," you won't be able to initiate a withdrawal even if you've completed 3 years. This often happens due to missed annual contributions or outdated KYC. Check our Guide on Fixing Frozen NPS & PRAN Accounts to restore access before you apply.
4. Confirmed NPS Partial Withdrawal Rules (2026)
This is the section that determines whether your request will succeed or fail. Most rejections arise from misunderstanding these rules rather than from ineligibility.
4.1 How Much Can You Withdraw
You may withdraw up to 25% of your own contributions only.
What is included:
Your personal contributions to NPS over time
What is excluded:
Employer contributions
Government contributions
Market gains or investment growth
Example
Assume the following:
Total personal contribution: ₹4,00,000
Current market value of the account: ₹6,50,000
Even though the account is worth ₹6.5 lakh, the maximum eligible withdrawal is ₹1,00,000, calculated strictly as 25% of your own contributions.
Market gains are intentionally excluded to protect the long-term compounding objective of NPS.
4.2 How Many Times Can You Withdraw
Partial withdrawal is allowed up to three times during the entire NPS tenure.
This limit is often misunderstood.
Rule | Meaning |
4 withdrawals | Across your entire NPS journey |
Not per year | No annual or periodic reset |
Each withdrawal permanently reduces your remaining allowed count.
Guardrail: Do not plan withdrawals assuming future relaxations or policy changes unless officially notified by PFRDA at the time of request.
New Rule: There is now a mandatory 4-year gap between two partial withdrawals (reduced from the previous 5-year requirement in some models). However, this gap is waived for medical emergencies.
4.3 Permitted Reasons
Partial withdrawal is allowed only for notified purposes. This is non-negotiable.
Allowed Reasons
Children’s higher education
Children’s marriage
Purchase or construction of the first residential house (one-time only)
Medical treatment or hospitalisation for:
Self
Spouse
Children
Parents
Skill development/re-skilling or any other self-development activities.
Establishment of her/his own venture or any start-ups
[PFRDA rules do not allow withdrawal for general hospital emergencies (like a broken leg, dengue, or routine surgery). It is strictly restricted to a "Specified Critical Illness" list (e.g., Cancer, Kidney Failure, Stroke, Organ Transplant, Covid-19 with complications)].
Not Allowed
Business or trading losses
Personal loan repayment or credit card dues
Lifestyle or discretionary spending (travel, gadgets, investments)
General cash needs without documentary backing
Important: Selecting an incorrect purpose is one of the most common reasons for outright rejection.
NPS rules for buying a house are very strict (only allowed once and only if you don't own a property). If you need funds for home renovation or a second property, an EPF advance is far more flexible. Compare the two here: EPF Form 31: PF Advance Rules for 2026.
5. NPS Partial Withdrawal vs Premature Exit
This comparison exists to prevent irreversible mistakes.
Aspect | Partial Withdrawal | Premature Exit |
Account status | Continues | Closes permanently |
Pension impact | Limited | Severe |
Tax treatment | Usually tax-free | Conditional |
Reversibility | Yes (future contributions continue) | No |
Exit Flexibility:
Major Update: For "Normal Exit" (at age 60/retirement), non-government subscribers (All Citizen/Corporate) can now withdraw up to 80% as a lump sum (up from 60%) if their corpus is above ₹12 lakh. The minimum annuity requirement has dropped to 20%.
Full Withdrawal Thresholds:
If the total corpus is ₹8 lakh or less at retirement, the subscriber can now withdraw 100% as a lump sum (previously ₹5 lakh).
("80/20 Rule" (80% Lump sum / 20% Annuity) for non-government employees at retirement.)
Bottom Line
If your financial need is temporary, a partial withdrawal protects your retirement far better than exiting NPS early.
Many people choose "Premature Exit" because they need more than 25% of their contribution. However, this triggers a mandatory 80% annuity lock-in. Before you close your account, read our NPS Premature Exit Guide to see if you can avoid the "80% trap."
6. Tax Treatment of NPS Partial Withdrawal
This area is widely misunderstood and often causes unnecessary hesitation.
Confirmed Rule (2026)
NPS partial withdrawal is tax-free, provided it is:
Within prescribed contribution-based limits
For permitted purposes
Executed in line with PFRDA regulations
Common Myth
“Partial withdrawal is taxable” → Incorrect
From a tax perspective, partial withdrawal is one of the safest liquidity options available within long-term retirement products.
While partial withdrawal is 100% tax-free, the extra 20% (between the 60% and 80% lump sum at retirement) is currently under debate; many experts suggest it may be taxed at slab rates unless specified in the 2026 Budget . To understand how to structure your final corpus to save lakhs in taxes, read our 2026 Guide on Retirement Taxation in India.
7. How to Apply for NPS Partial Withdrawal
Modes of Application
Online (Preferred)
Through the CRA portal
Aadhaar-based e-sign supported for faster processing
Offline
Through your registered Point of Presence (POP)
Documents Typically Required
Purpose | Documents |
Education | Admission letter or fee receipt |
Medical | Bills or hospital certificate |
Housing | Property purchase or construction documents |
Timelines
If documentation is accurate and account status is clear, approval and credit usually occur within 7–10 working days.
8. Why NPS Partial Withdrawal Requests Get Rejected
A rejection does not mean permanent denial.
Common reasons include:
Incorrect purpose selected
Withdrawal amount exceeding eligibility
PRAN is inactive or frozen due to compliance gaps
Name mismatch across PRAN, Aadhaar, and bank records
Missing FATCA declaration (especially for NRIs)
Reassurance: Most rejections are procedural and fully correctable with proper rectification.
9. When Kustodian Life Can Help
Assistance is usually useful when:
A valid withdrawal request is repeatedly rejected.
Urgent medical withdrawals face delays.
Documentation disputes arise across institutions.
Multiple withdrawals need careful planning without exhausting lifetime limits.
Our role is to help you access liquidity within the rules, without weakening the retirement foundation you have spent years building.
Is Your Withdrawal Stuck on "Pending"?
If you've submitted your request but haven't received the funds, it’s usually due to a "Penny Drop" failure or a name mismatch with your bank. Let our experts run a Free NPS Diagnostic Scan to pinpoint the exact technical blocker holding up your money.
10. Frequently Asked Questions
Is NPS partial withdrawal tax-free?
Yes. NPS partial withdrawal is tax-free when it is:
Within the prescribed 25% limit of your own contributions, and
For permitted purposes notified by PFRDA.If either condition is violated, the request itself is usually rejected rather than taxed.
Can I withdraw market gains through a partial withdrawal?
No. Only your own contributions are eligible. Employer/government contributions and market gains are excluded to protect long-term compounding.
Can I do a partial withdrawal after age 60?
Generally, no. Partial withdrawal applies during the accumulation phase. After age 60, withdrawals are governed by retirement exit rules, not partial-withdrawal provisions.
Does partial withdrawal reduce my pension?
Yes, but marginally. Since only a portion of your own contributions is withdrawn, the impact is far smaller than a premature exit, which permanently closes the account.
How many times can I withdraw from NPS?
Up to three times across your entire NPS tenure. This is a lifetime limit with no annual reset, so each withdrawal should be planned carefully.
Closing Summary
NPS partial withdrawal is a designed safety valve, not a loophole.
When used correctly, it provides timely liquidity without forcing irreversible retirement decisions. Most problems arise not from the rules themselves, but from misunderstanding or misapplication.
If your need is real but temporary, partial withdrawal allows you to meet today’s obligation without sacrificing tomorrow’s security.
Related Deep Dives for You:
For NRIs: [The NRI’s Guide to EPF Taxation, TDS & DTAA (2026)]
On Reforms: [EPFO Rule Changes 2026: Complete Summary of New PF & Pension Reforms]
On Security: [How to Find a Deceased Person’s Bank Accounts, Property & Unclaimed Assets in India (2026)]
On Technical Fixes: [EPF Joint Declaration Form: Name, DOB & Detail Correction Guide]
Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Rules may vary based on individual records and PFRDA processing.