Age 60: 60% tax-free lumpsum + 40% mandatory annuity. Partial withdrawal up to 25% before 60 (education/marriage/house/illness). Premature exit: worse 20/80 split.
NPS AGE 60 (or superannuation) WITHDRAWAL: (1) 60% TAX-FREE LUMPSUM withdrawal. (2) 40% MANDATORY ANNUITY purchase from PFRDA-empanelled insurer. (3) ANNUITY income is TAXABLE at slab rate. (4) ANNUITY type selection: lifetime, joint, return of corpus. EXAMPLE: ₹50L NPS corpus at 60. (a) ₹30L lumpsum tax-free. (b) ₹20L annuity purchase. (c) Annuity provides ~₹15-17K monthly taxable income. STRATEGIC: 60% tax-free vs PPF 100% tax-free maturity — NPS less flexible but higher returns potential.
PARTIAL WITHDRAWAL FROM NPS TIER 1 (before age 60): (1) ALLOWED for specific reasons. (2) UP TO 25% of OWN contribution (employer contributions excluded). (3) MAX 3 partial withdrawals over entire NPS tenure. (4) MIN 5 YEARS contribution required. (5) GAP of 5 YEARS between partial withdrawals. ALLOWED REASONS: (1) Higher education (self + children). (2) Children's marriage. (3) House purchase/construction. (4) Critical illness treatment (subscriber + family). (5) Skill development. PROCESS: online via NPS portal. TAX-FREE.
NPS PREMATURE EXIT (before age 60): (1) AGE < 60: 20% LUMPSUM + 80% ANNUITY mandatory (worse than normal 60/40). (2) UNDER ₹2.5L CORPUS: full lumpsum allowed. (3) DEATH BEFORE 60: nominee gets 100% lumpsum (no annuity mandatory). (4) DISABILITY: 60/40 rule (same as 60). STRATEGIC: avoid premature exit — locked-in retirement scheme. Higher annuity allocation = lower lumpsum flexibility. (5) GOVT EMPLOYEES: separate rules under OPS comparison. RECENT: PFRDA simplification 2024 for very low corpora.
ANNUITY MANDATE: 40% of NPS corpus MUST buy annuity from PFRDA-empanelled insurers. EMPANELLED INSURERS (12 currently): LIC, HDFC Life, SBI Life, ICICI Pru Life, etc. ANNUITY TYPES: (1) LIFETIME: pays till subscriber dies. (2) JOINT LIFE: spouse continues. (3) WITH RETURN OF CORPUS: lower payout but principal returned to nominee. (4) GUARANTEED PERIOD + LIFETIME. RATE: 6-7% typical. EXAMPLE: ₹20L annuity at 7% = ₹140K/year ≈ ₹11,700/month. TAXABLE at slab. NRI: same rules apply. STRATEGIC: choose joint life if spouse younger.
NPS WITHDRAWAL STRATEGY: (1) MAX OUT NPS pre-60 for compounded growth. (2) AGE 60: 60% lumpsum tax-free into mutual funds or PPF reinvestment. (3) ANNUITY selection: joint life if spouse younger, return of corpus for inheritance. (4) PARTIAL WITHDRAWALS strategic for education/marriage/house — tax-free, low impact on retirement corpus. (5) NPS VATSALYA for minors: same withdrawal rules at 60. (6) NPS TIER 2: voluntary investment, withdraw anytime (no tax benefit + no lock-in). (7) DON'T REDEEM PREMATURELY: 80% annuity worse than 40%. (8) SYSTEMATIC LUMP SUM WITHDRAWAL (SLW) option: phased withdrawal over years to manage tax. (9) ENGAGE financial advisor for retirement planning combining NPS + PPF + EPF + mutual funds.