NPS Withdrawal

The National Pension System (NPS) is a government-backed retirement savings scheme that allows individuals to build a pension corpus through regular contributions. At the time of withdrawal (upon reaching the age of 60), up to 60% of the accumulated corpus can be withdrawn as a lump sum, and this 60% portion is fully exempt from tax. The remaining 40% must be used to purchase an annuity, which provides regular pension income and is taxable as per the individual’s income tax slab in the year of receipt. Example: If you withdraw ₹5 lakh from your NPS account at retirement, ₹3 lakh (60%) is tax-free, while the remaining ₹2 lakh (used to buy an annuity) will generate pension income that is taxable in future years as you receive it.