PFRDA allows up to 80% NPS withdrawal

New Delhi: In a major overhaul of the National Payment System (NPS), the Pension Fund Regulatory and Development Authority (PFRDA) has allowed subscribers from the private sector to withdraw up to 80% of the accumulated corpus, instead of 60% earlier, with the rest to be used to purchase annuities to earn a pension.

Subscribers have the option to stay in NPS until 85 years, instead of 75 years earlier, and the regulator reiterated allowing systematic unit redemption, which are akin to systematic withdrawal plans offered by mutual funds. Systematic unit redemption can be used only from the 80% permitted withdrawal.

Besides, four withdrawals, instead of three, have been allowed till the subscriber turns 60 years, making it possible for individuals to dip into the corpus to meet requirements, such as education, house purchase or weddings.

There is, however, need for clarity on the tax treatment as only 60% withdrawal is currently tax-free. Govt may amend the law to provide for 80% withdrawal free of taxes.

The revised limit is applicable to those, who have been subscribers for 15 years or more or are retiring. Those with a corpus of up to Rs 8 lakh will be allowed to withdraw the entire balance, against Rs 5 lakh cut off earlier. The limit for full withdrawal has been changed as annuity sellers do need a minimum purchase value of Rs 2 lakh, said an industry source.

Those with an accumulated balance of Rs 8-12 lakh, will have the option to withdraw up to Rs 6 lakh as lump sum or avail periodic payouts in the form of systematic lump sum withdrawal or systematic unit redemption.