NPS Tier 1 Withdrawal Rules and Tax Treatment: 2026

By Team Savingy

Published: 15 Sept 2026 · Updated: 3 Oct 2026

Compare NPS Tier 1 normal exit, premature exit and partial withdrawal rules, with sector-specific examples and separate checks for tax treatment.

Choose the right NPS withdrawal route first

Before calculating an NPS Tier 1 withdrawal, identify normal exit, premature exit or partial withdrawal. Record your joining age, sector, subscription period, accumulated pension wealth and, for partial withdrawals, your own contributions. Those details determine which rules below apply.

Keep permission to withdraw separate from tax exemption. NPS Trust's normal-exit and tax-benefit pages describe different tests; a permitted withdrawal amount should not automatically be labelled entirely tax-free.

Your pre-withdrawal worksheet

• Subscriber sector and date/age of joining.
• Exit or partial-withdrawal reason and proposed date.
• Latest pension wealth, own contributions and past withdrawals.
• Applicable lump-sum, annuity or periodic-payout conditions.
• Tax treatment for the specific route, checked with current official guidance.

Use the retirement calculator below for scenarios, with explicit assumptions. It does not determine NPS eligibility or calculate your individual withdrawal tax. The detailed guide retains its stated September 2026 source basis; recheck official rules before acting.

NPS withdrawal rules depend on whether the transaction is a normal exit, a premature exit or a partial withdrawal without closing the account. They also depend on when the subscriber joined, the sector involved, the accumulated pension wealth and, in some cases, the subscriber’s own contributions. This guide is based on NPS Trust material dated 8 September 2026. [C1]

The most important distinction is between subscribers who joined from age 18 to 60 and those who joined at age 60 or later. The normal-exit thresholds for the first group must not be applied to the second group, because subscribers joining at or after 60 have a separate exit framework. [C2]

NPS Tier 1 withdrawal rules at a glance

The first four rows are expressly limited to normal exits by subscribers who joined between ages 18 and 60. The two rows that follow apply to people who joined at age 60 or later. Keeping those categories separate prevents the ₹8 lakh threshold for the first group from being confused with the ₹12 lakh threshold available to the second group. [C2] [C4] [C8]

What counts as a normal exit?

Subscribers who joined between ages 18 and 60

For someone who joined NPS between ages 18 and 60, normal exit occurs on attaining age 60, completing 15 years of subscription or completing a higher period stipulated under a scheme, or on superannuation, whichever relevant milestone applies and occurs earlier. [C2]

There is an additional sector-specific formulation. All Citizen and Unorganised Sector subscribers can take a normal exit after completing 15 years of subscription or attaining age 60, whichever is earlier. Corporate Sector subscribers become eligible on retirement or superannuation under their service rules or employment terms. [C3]

Once an eligible subscriber in this age-at-joining group reaches normal exit, the accumulated pension wealth determines the permitted mix. Up to ₹8 lakh, the full amount may be withdrawn as a lump sum or received through SLW or SUR. [C4]

If the accumulated pension wealth is above ₹8 lakh but no more than ₹12 lakh, up to ₹6 lakh may be withdrawn as a lump sum or through SLW or SUR. The remaining amount must either purchase an annuity or be paid through SUR for at least six years. This rule applies on normal exit in both the government and non-government sectors. [C5]

Above ₹12 lakh, the sector changes the mandatory annuity share. A government-sector subscriber must apply at least 40% towards an annuity, while a non-government-sector subscriber must apply at least 20%. In both cases, the balance may be paid as a lump sum or through SLW or SUR. [C6] [C7]

Subscribers who joined at age 60 or later

A subscriber who joined NPS at or after age 60 may take a normal exit at any time. If accumulated pension wealth is up to ₹12 lakh, all of it may be withdrawn as a lump sum or through SLW or SUR. If it exceeds ₹12 lakh, at least 20% must purchase an annuity, while the balance may be paid as a lump sum or through SLW or SUR. [C8]

This is a separate framework rather than an extension of the rules for people who joined between ages 18 and 60. In particular, a person who joined at or after 60 should not use the ₹8 lakh full-withdrawal threshold applicable to the earlier age-at-joining group. [C2] [C4] [C8]

Normal-exit examples

Example 1: accumulated pension wealth of ₹7 lakh

Assume a subscriber joined between ages 18 and 60, has reached the applicable normal-exit milestone and has accumulated pension wealth of ₹7 lakh. Because this is within the ₹8 lakh threshold, the full ₹7 lakh may be withdrawn as a lump sum or received through SLW or SUR. [C4] [C23]

Example 2: accumulated pension wealth of ₹10 lakh

For an eligible normal exit by a subscriber who joined between ages 18 and 60, accumulated pension wealth of ₹10 lakh falls in the band above ₹8 lakh and up to ₹12 lakh. Up to ₹6 lakh may therefore be withdrawn as a lump sum or through SLW or SUR. The remaining ₹4 lakh must purchase an annuity or be paid through SUR for at least six years. [C5] [C24]

Example 3: government-sector wealth of ₹20 lakh

For a government-sector normal exit above ₹12 lakh, at least 40% must purchase an annuity. On accumulated pension wealth of ₹20 lakh, that minimum is ₹8 lakh. The remaining ₹12 lakh may be paid as a lump sum or through SLW or SUR. [C6] [C25]

Example 4: non-government-sector wealth of ₹20 lakh

For a non-government-sector normal exit above ₹12 lakh, at least 20% must purchase an annuity. On ₹20 lakh, the minimum annuity allocation is ₹4 lakh, leaving ₹16 lakh that may be paid as a lump sum or through SLW or SUR. [C7] [C26]

These examples illustrate the withdrawal mechanics only. They should not be treated as conclusions about the tax treatment of every rupee withdrawn, because the supplied tax findings address only specified partial withdrawals, a 60% lump-sum withdrawal on attaining age 60 or superannuation, annuity purchase at that point and subsequent annuity income. [C20] [C21] [C22] [C30]

Premature exit rules

For a subscriber who joined between ages 18 and 60, an exit before age 60, before completing 15 years of subscription or a higher scheme-stipulated period, or before superannuation, as applicable, is treated as a premature exit. [C9]

In the government sector, premature exit includes resignation, voluntary closure, dismissal or premature removal by the government or employer. In the non-government sector, it applies when the subscriber voluntarily exits before the applicable normal-exit milestone. [C10]

If accumulated pension wealth is up to ₹5 lakh on premature exit, all of it may be withdrawn as a lump sum or through SLW or SUR. If accumulated pension wealth exceeds ₹5 lakh, at least 80% must purchase an annuity, and the balance may be paid as a lump sum or through SLW or SUR. These thresholds apply in both the government and non-government sectors. [C11] [C12]

For example, premature exit with accumulated pension wealth of ₹10 lakh requires at least ₹8 lakh, or 80%, to purchase an annuity. The remaining ₹2 lakh may be paid as a lump sum or through SLW or SUR. [C12] [C27]

Premature-exit provisions do not apply to subscribers who joined NPS at age 60 or above. Such subscribers instead fall under the separate normal-exit framework that allows exit at any time. [C8] [C13]

Partial withdrawal without closing the account

A partial withdrawal is different from an exit because the individual pension account remains open. A subscriber may make a partial withdrawal only after completing at least three years in NPS. [C14]

Limits before age 60 or superannuation

Before age 60 or superannuation, a subscriber may make no more than four partial withdrawals from each individual pension account. Each withdrawal is limited to 25% of the subscriber’s own contributions in that account, and there must be a minimum four-year gap between successive withdrawals. [C15]

The percentage is based on the subscriber’s own contributions, not simply the displayed accumulated pension wealth. For example, if the subscriber’s own contributions are ₹4 lakh, 25% is ₹1 lakh. Subject to all other applicable conditions, the withdrawal limit derived from those contributions would therefore be ₹1 lakh. [C15] [C28]

That distinction matters when reviewing an account statement: using the total accumulated pension wealth as the base could produce a different number from using the subscriber’s own contributions. Checking the contribution base before applying the 25% limit is therefore a prudent practical step. [C15] [C31]

Partial withdrawals after age 60 or superannuation

Subscribers who remain in NPS after age 60 or superannuation may make partial withdrawals from each individual pension account with a minimum three-year interval between successive withdrawals in that account. [C16]

The supplied finding for this post-60 or post-superannuation situation establishes the three-year interval. This article does not infer an additional frequency or percentage rule that is not stated in that finding. [C16] [C30]

Permitted purposes

Partial withdrawals are permitted for children’s higher education or marriage. They may also be used for a one-time purchase or construction of a home in the subscriber’s name or jointly with a legally wedded spouse, provided the subscriber does not already own a home other than ancestral property. [C17]

Other permitted purposes include specified medical treatment or hospitalisation, expenses arising from the subscriber’s disability or incapacitation, and settlement of an obligation to a regulated financial institution against a lien or charge on the account. [C18]

A partial-withdrawal request and the relevant documents may be submitted to the POP or nodal office. If the subscriber is ill, a family member may submit the request. [C19]

Tax treatment supported by the 2026 findings

Tax treatment of an eligible partial withdrawal

An eligible NPS partial withdrawal of up to 25% of the subscriber’s own contributions is exempt from tax under Section 10(12B), subject to PFRDA’s terms and conditions. [C20]

The tax finding and the withdrawal finding use the same contribution base: the subscriber’s own contributions. Eligibility under the withdrawal rules, including the applicable purpose and timing conditions, should therefore be checked before relying on the stated exemption. [C14] [C15] [C17] [C18] [C20] [C32]

Tax treatment of annuity purchase and annuity income

The purchase of an annuity on attaining age 60 or superannuation is tax-exempt under Section 80CCD(5). Subsequent annuity income is taxable under Section 80CCD(3). [C21]

The distinction is between using the money to purchase the annuity and later receiving income from that annuity. The cited treatment does not describe both stages as exempt: it exempts the purchase at age 60 or superannuation and treats the subsequent income as taxable. [C21]

Tax treatment of the 60% lump sum

A lump-sum withdrawal equal to 60% of accumulated pension wealth on attaining age 60 or superannuation is tax-exempt under Section 10(12A). [C22]

This tax statement should be read with its stated trigger and percentage. It concerns a lump sum equal to 60% on attaining age 60 or superannuation. The supplied findings do not establish the tax treatment of every other lump-sum amount, every SLW or SUR payment, or every amount received on premature exit. This article therefore does not assign a tax result to those cases. [C22] [C30]

Why withdrawal permission and tax exemption must be checked separately

The exit rules specify how accumulated pension wealth may be divided among an annuity, lump sum, SLW or SUR. The tax findings separately identify particular exemptions and taxable annuity income. A permitted withdrawal percentage should not automatically be treated as a tax-exempt percentage unless the cited tax rule supports that conclusion. [C4] [C5] [C6] [C7] [C8] [C11] [C12] [C20] [C21] [C22] [C33]

For example, the non-government normal-exit rule above ₹12 lakh permits at least 20% to purchase an annuity and allows the balance to be paid as a lump sum or through SLW or SUR. Separately, the supplied tax finding expressly identifies a lump sum equal to 60% on attaining age 60 or superannuation as exempt. The findings supplied here do not state the tax treatment of a lump sum beyond that identified 60%, so no broader tax conclusion is made. [C7] [C22] [C30]

A practical review sequence

1. Confirm age at joining. Decide whether the subscriber joined between ages 18 and 60 or at age 60 or later, because the normal-exit frameworks differ. [C2] [C8]
2. Classify the transaction. Determine whether it is a normal exit, premature exit or partial withdrawal without closing the account. [C2] [C9] [C14]
3. Identify the sector and milestone. The normal-exit milestone and the annuity requirement above ₹12 lakh can depend on the subscriber’s sector. [C3] [C6] [C7]
4. Check the relevant wealth band. Normal-exit thresholds include ₹8 lakh and ₹12 lakh for those joining between ages 18 and 60, while premature exit uses ₹5 lakh. Subscribers joining at or after 60 have a separate ₹12 lakh threshold. [C4] [C5] [C8] [C11] [C12]
5. For partial withdrawal, use own contributions. Before age 60 or superannuation, each withdrawal is limited to 25% of the subscriber’s own contributions and is subject to the other timing and frequency conditions. [C15]
6. Apply only the tax treatment expressly supported. The findings cover eligible partial withdrawals, a 60% lump sum at age 60 or superannuation, annuity purchase at that stage and subsequent annuity income. [C20] [C21] [C22]

Separating these questions is a useful way to avoid applying the right percentage to the wrong subscriber category or assuming that an amount permitted under the exit rules necessarily has a specified tax treatment. [C31] [C33]

Key takeaways

• Subscribers joining between ages 18 and 60 have normal-exit wealth bands of up to ₹8 lakh, above ₹8 lakh to ₹12 lakh, and above ₹12 lakh. The rules within those bands vary by amount and, above ₹12 lakh, by sector. [C4] [C5] [C6] [C7]
• Subscribers joining at age 60 or later may take normal exit at any time and use a separate ₹12 lakh threshold. [C8]
• Premature exit permits complete withdrawal up to ₹5 lakh; above ₹5 lakh, at least 80% must purchase an annuity. These premature-exit provisions do not apply to people who joined at age 60 or later. [C11] [C12] [C13]
• Before age 60 or superannuation, partial withdrawals require at least three years in NPS, are capped at four per individual pension account, are limited to 25% of own contributions and require four years between successive withdrawals. [C14] [C15]
• An eligible partial withdrawal within the stated 25% limit is exempt under Section 10(12B), subject to PFRDA’s terms and conditions. [C20]
• Annuity purchase on attaining age 60 or superannuation is exempt under Section 80CCD(5), but subsequent annuity income is taxable under Section 80CCD(3). [C21]
• A lump sum equal to 60% of accumulated pension wealth on attaining age 60 or superannuation is exempt under Section 10(12A). [C22]

Sources used

Source 1: NPS Trust, Normal Exit, npstrust.org.in/normal-exit. Source 2: NPS Trust, Pre-Mature Exit, npstrust.org.in/pre-mature-exit. Source 3: NPS Trust, Partial Withdrawal, npstrust.org.in/partial-withdrawal. Source 4: NPS Trust, Tax Benefits under NPS, npstrust.org.in/benefits-of-nps. [C34]