As new NPS withdrawal rules come into effect, what has changed now? An explainer

As per the revised rules, up to 60% of NPS maturity amount can be withdrawn in instalments till the subscribers hit the age of 75.

MintGenie Team
Published1 Nov 2023, 05:37 PM IST
The NPS payouts can be monthly, quarterly, half-yearly and yearly.
The NPS payouts can be monthly, quarterly, half-yearly and yearly.

The Pension Fund Regulatory and Development Authority (PFRDA) has proposed the introduction of a systematic lump sum withdrawal facility. This will allow subscribers to receive regular payments instead of withdrawing the sum in one go from their investment in the National Pension System (NPS).

As per the revised rules, up to 60 percent of their NPS maturity amount can be withdrawn in instalments till the subscribers hit the age of 75. 

The payouts can be monthly, quarterly, half-yearly and yearly. 

In order to apprise the subscribers, the regulator has urged Central Record Keeping Agencies (CRAs) to keep them abreast of the latest changes.

What are the current rules?

It is vital to note that the investors are currently allowed to withdraw only 60 percent of their NPS corpus as lumpsum on maturity, while the remaining 40 percent of corpus is to be used as annuity.

For instance, if a subscriber has accumulated 50 lakh as NPS corpus, 20 lakh (40%) is supposed to be withdrawn as annuity, while the remaining 30 lakh (60%) is treated as lumpsum. 

What has changed now?

With the new rules in force, the lumpsum component — along with annuity — can also be withdrawn in instalments which could be monthly, quarterly, half-yearly and yearly. 

In the above case, the lumpsum component of 30 lakh can be withdrawn in instalments along with annuities amounting to 20 lakh. 

What will be the advantages of opting for this?

The advantages of opting for systematic withdrawal is to increase the cash flow on a regular basis. So, instead of relying on 40 percent of corpus for annual payouts, subscribers can now use their lumpsum component of 60 percent also to generate a regular income.

Additionally, subscribers can prevent the adverse impact of a bearish market at the time of retirement. Upon choosing the lumpsum mode, they have to settle for lower returns. But if one happens to stagger the payout over a period of time, one can save oneself from the impact of a bearish market.  

It is important to note that the 60 percent lumpsum income is totally tax free while the annuity income is taxable as per the investor’s tax slab.

 

Catch all the Instant Personal Loan, Business Loan, Business News, Money news, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

Business NewsMoneyPersonal FinanceAs new NPS withdrawal rules come into effect, what has changed now? An explainer
MoreLess
First Published:1 Nov 2023, 05:37 PM IST
Get Instant Loan up to ₹10 Lakh!
  • Employment Type
    Most Active Stocks
    Market Snapshot
    • Top Gainers
    • Top Losers
    • 52 Week High
    Recommended For You
      More Recommendations
      Gold Prices
      • 24K
      • 22K
      Fuel Price
      • Petrol
      • Diesel
      Popular in Money