You can now take 80% of your NPS as cash. Tax-free stops at 60%.
The rules for taking money out of NPS changed on 15 December 2025. If you hold NPS on your own or through a private employer, you can now take up to 80% of the corpus as a lump sum when you exit, up from 60%, and only 20% has to buy an annuity. Government employees stay at 60/40. The tax law did not move with the rule: only 60% of the corpus is tax-free, so taking 80% means 20% of the corpus is taxed as income that year. The charges changed too, though not on 1 October, the date many reports gave.
At a normal exit, private-sector and self-employed subscribers can now take up to 80% of their NPS as a lump sum. Government employees can still take 60%. Only 60% of the corpus is tax-free under the Income-tax Act, 2025, so the extra 20% is taxed at your slab rate, and Budget 2026 left that alone. A corpus of ₹8 lakh or less can be withdrawn in full, and you can stay invested until 85. If your account was opened through a bank or another Point of Presence, you pay 0.20% of your balance a year plus GST, even if you now pay in through e-NPS. That charge began on 1 January 2026, though many reports dated it from 1 October.
Every change since December 2025, and whether it is law
| Change | Who it applies to | Status | From |
|---|---|---|---|
| Up to 80% as a lump sum at a normal exit, at least 20% to an annuity | All Citizen and corporate accounts | In force | 15 Dec 2025 |
| Up to 60% as a lump sum, at least 40% to an annuity (unchanged) | Government employees | In force | 15 Dec 2025 |
| All of a corpus up to ₹8 lakh can be withdrawn; ₹6 lakh as a lump sum up to ₹12 lakh | Everyone | In force | 15 Dec 2025 |
| Stay invested, or defer the exit, until 85 | Everyone | In force | 15 Dec 2025 |
| Only 60% of the corpus is tax-free at exit | Everyone | Unchanged law | 1 Apr 2026, under the new Act |
| ₹200 onboarding and 0.20% a year for accounts opened through a PoP | Common schemes, Vatsalya, Lite | In force | 1 Jan 2026 |
| The same charges extended to every scheme | Accounts opened through a PoP | In force | 1 Oct 2026 |
| MSF schemes sorted into categories A to E, renamed, some merged | Non-government MSF schemes | In force | 28 Aug 2026; mergers by 12 Oct |
| Digital PoPs, pension agents renamed “NPS Mitra” | PoPs and their agents | Proposed | Comments closed 2 Oct 2026 |
In force since 15 December 2025: how much you can take out
The PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025 were notified on 12 December 2025 and took effect when the Gazette published them on 15 December. They decide how NPS’s 2.17 crore subscribers, who held ₹15.95 lakh crore between them at the end of March 2026, get their money out.
What you can take depends on whether your account is in the government sector and how big the corpus is when you leave. A normal exit means leaving at 60, at retirement or, for an All Citizen account, after 15 years in NPS, whichever comes first.
| Corpus at exit | Non-government | Government |
|---|---|---|
| Up to ₹8 lakh | All of it, at once or in instalments | All of it, at once or in instalments |
| ₹8 lakh to ₹12 lakh | ₹6 lakh at once, the rest over at least six years or as an annuity; or the 80/20 split | ₹6 lakh at once, the rest over at least six years or as an annuity; or the 60/40 split |
| Above ₹12 lakh | Up to 80% at once, at least 20% to an annuity | Up to 60% at once, at least 40% to an annuity |
“In instalments” means one of the two payout routes the regulations now name: systematic lump sum withdrawal or systematic unit redemption. Instead of taking the money at once, you draw it over time and the rest stays invested.
Leaving before a normal exit still means at least 80% of the corpus has to buy an annuity. The limit for taking everything out on an early exit rose from ₹2.5 lakh to ₹5 lakh, and All Citizen accounts lost the old five-year minimum before you could leave at all.
The same notification changed a few other things.
- The account carries on automatically after 60 or retirement, up to age 85, without the 15 days’ notice the old rules required. You can defer the lump sum, the annuity or both, and the account’s charges keep running while you do.
- Before 60 you can make up to four partial withdrawals, at least four years apart, each up to 25% of your own contributions. Medical treatment or hospitalisation for you, your spouse, children or parents now qualifies; the old rules limited it to a list of critical illnesses. Withdrawals to start a business or pay for skills training were removed.
- A regulated lender can mark a lien on up to 25% of your own contributions, under guidelines PFRDA issues, and repaying such a loan is now a permitted reason for a partial withdrawal.
For central and state government employees the main split did not move: up to 60% at once and at least 40% into an annuity. That leaves the comparison in UPS vs NPS: what the assured pension actually assures as it was for anyone choosing between the two schemes.
Tax law still stops at 60%
The Income-tax Act, 2025, which replaced the 1961 Act on 1 April 2026, carried the old NPS exemption across unchanged. Entry 6 of Schedule II exempts a payment from the NPS Trust on closure only if it “does not exceed 60% of the total amount payable”. Section 124(6) treats the rest of what you receive on closure, and the pension your annuity pays, as income of the year you receive it.
So PFRDA allows 80% and the tax law exempts 60%. If you take the full 80%, the difference, 20% of your corpus, is added to that year’s income and taxed at your slab rate. The Finance Act, 2026 amended dozens of provisions in the new Act and left both of these alone. We found no CBDT circular extending the exemption as of 12 October 2026.
The tax department hasn’t said how instalments count against the 60% limit, so check with a tax adviser before relying on them. The annuity, whichever split you choose, is taxed every year at your slab rate.
Worked example: a ₹50 lakh corpus at 60
Assumptions. A private-sector subscriber leaves NPS at 60 with ₹50 lakh and takes the largest lump sum allowed. The annuity pays 6% a year. Axis Max Life, one of the NPS annuity providers, quoted 5.82% to 6.51% for its NPS annuities in February 2026, depending on the type.
| Old rules, 60/40 | New rules, 80/20 | |
|---|---|---|
| Lump sum | ₹30,00,000 | ₹40,00,000 |
| Tax-free part of it | ₹30,00,000 | ₹30,00,000 |
| Added to that year’s taxable income | ₹0 | ₹10,00,000 |
| Used to buy the annuity | ₹20,00,000 | ₹10,00,000 |
| Annuity income, taxed each year | ₹1,20,000 a year (₹10,000 a month) | ₹60,000 a year (₹5,000 a month) |
What the extra ₹10 lakh costs depends on the rest of your income that year. At the 30% slab it costs ₹3 lakh, before cess and any surcharge. Exit in a year with little other income and more of it falls in the lower slabs.
You don’t have to take the full 80%. You can stop at 60%, keep the whole lump sum tax-free and put the rest into a bigger annuity, whose income is taxed a little each year instead of all at once. The retirement planner now models a 20% annuity for private-sector users and 40% for government employees.
The 0.20% charge did not start on 1 October
Since late August, many reports have described a new NPS fee from 1 October 2026: ₹200 to open an account and 0.20% of your balance every year. Both figures are real, but they were already in force. A PFRDA circular of 10 March 2026 set them for common schemes under the All Citizen model, including NPS Vatsalya and NPS Lite, from 1 January 2026. It said the yearly charge applied “to all existing NPS accounts as well”.
A second circular, dated 28 August 2026, widened this from 1 October. The charge now covers every scheme, because PFRDA ended the separate status of MSF schemes the same day. The ₹200 is charged once per PRAN rather than per account. And dormancy, which exempts an account from the charge, is now checked by PAN across all the record-keeping agencies: an account counts as dormant after four straight quarters with no contribution.
| Charge | Until December 2025 | From January 2026 |
|---|---|---|
| Opening the account | Up to ₹400 | ₹200, or ₹100 if fully digital, taken as ₹50 a quarter |
| On each contribution | Up to 0.50%, capped at ₹25,000 | None |
| Every year | ₹50 to ₹100 persistency fee | 0.20% of your balance |
The new structure is cheaper when you start and dearer as the pot grows. Under the old rules, someone paying in ₹1 lakh a year through a bank paid at most ₹500 on those contributions plus a ₹100 persistency fee. Under the new rules the same person pays 0.20% of the balance: ₹2,000 a year at ₹10 lakh and ₹6,000 a year at ₹30 lakh, before GST. It won’t show up as a separate line, because it is taken through the NAV.
The charge follows how the account was opened. The circular says subscribers onboarded through a PoP who contribute through e-NPS or D-Remit “shall be liable to pay PoP charges”, and only accounts opened through e-NPS and funded through e-NPS or D-Remit pay none. The circulars don’t say whether moving an existing account away from its PoP ends the charge, so ask your record-keeping agency (Protean, KFintech or CAMS) before assuming it does.
For scale, PFRDA’s scheme circular puts the combined PoP and fund management charge at 0.24% to 0.32% of assets a year for PoP subscribers, against 0.04% to 0.12% for direct subscribers. The gap between the two ranges is the PoP charge.
StAR NPS, the onboarding platform PFRDA introduced in June 2026 for PoPs and their agents, who can include mutual fund distributors, counts as assisted onboarding. Accounts opened on it are PoP accounts: they pay the ₹200 plus taxes, and the yearly charge after that.
All of this covers accounts you hold yourself. NPS run through an employer is charged under separate circulars, so ask your employer’s NPS desk what you pay.
MSF schemes have new names, and mergers were due by 12 October
The Multiple Scheme Framework, launched on 1 October 2025, let pension funds offer non-government subscribers schemes with their own equity mandates. On 28 August 2026 PFRDA folded it into a single classification for NPS schemes: lifecycle schemes, active choice, NPS Sanchay, MSF schemes, and special-purpose schemes such as NPS Vatsalya.
MSF schemes now sit in five categories by equity share, from A, with 80% to 100% in equity, down to E, with 0% to 10%. Each name must carry its letter, as in “XYZ NPS A Retirement Scheme”. Pension funds had 30 days to rename and reclassify their schemes. Where a fund ran more than two schemes in one category in a tier, it had 45 days, until 12 October 2026, to merge them after telling subscribers.
If a scheme you hold is wound up, you will be offered a choice of another. If you don’t make one, your money moves to the same pension fund’s Life Cycle 50 – Moderate scheme in Tier I, which holds up to 50% in equity until 35 and steps down to 10% by 55. You can change your scheme or pension fund at most twice in a financial year for each account. Government-sector accounts are outside this framework.
The same circular describes NPS Sanchay, a simplified scheme for the informal sector introduced in May 2026. It follows the government-sector investment pattern, with equity capped at 25%.
Proposed, not law: the PoP draft
On 2 September 2026 PFRDA published draft changes to the Point of Presence Regulations, 2018, and took comments until 2 October. As of 12 October it had not published final regulations. The draft would split PoPs into physical and digital modes, let LLPs, societies, trusts and co-operatives register, change the fees PoPs pay PFRDA, and rename pension agents as “NPS Mitra”. Some reports listed compensation for subscribers as a new protection. It isn’t new: the duty to indemnify you for fraud or negligence is already in the regulations, and the draft only renames the agents it covers. Nothing in the draft changes what you pay or how you exit.
What this means for you
If you are in the private sector and close to exit, decide how much of the extra 20% you need as cash; it is taxed, and the first 60% is not. A corpus of ₹8 lakh or less can come out in full. An account opened through a bank pays 0.20% of its balance a year, whichever way you contribute now. If you hold an MSF scheme, check your pension fund’s notices: schemes had to be renamed by late September and any mergers done by 12 October.
To check whether NPS, EPF and your other investments add up to enough, the FIRE calculator starts from the income you want and works back to the corpus it needs.
Questions worth asking
Is the 80% NPS lump sum tax-free?
Only part of it. Entry 6 of Schedule II to the Income-tax Act, 2025 exempts a payment from the NPS Trust on closure only up to 60% of the total amount payable. If you take 80%, the other 20% of the corpus is added to your income for that year and taxed at your slab rate. The Finance Act, 2026 did not change this, and we found no CBDT circular extending the exemption as of 12 October 2026.
Do I still pay the 0.20% NPS charge if I contribute through e-NPS?
Yes, if your account was opened through a bank or another Point of Presence. PFRDA’s circular of 28 August 2026 says subscribers onboarded through a PoP who contribute through e-NPS or D-Remit still pay PoP charges. Only accounts opened through e-NPS and funded through e-NPS or D-Remit pay none. Dormant accounts, with no contribution for four consecutive quarters, are not charged either.
Can I withdraw my whole NPS corpus at 60?
Only if it is ₹8 lakh or less. Up to that amount, government and non-government subscribers alike can take all of it, as a lump sum or in instalments. Between ₹8 lakh and ₹12 lakh you can take up to ₹6 lakh as a lump sum and receive the rest over at least six years or as an annuity. Above ₹12 lakh, at least 20% has to buy an annuity, or 40% for government employees.
Do government employees get the 80% NPS lump sum?
No. The December 2025 amendment raised the limit for non-government subscribers only, meaning the All Citizen and corporate models. Central and state government employees in NPS can still take up to 60% as a lump sum at retirement, and at least 40% has to buy an annuity. They did get the higher small-pot limits: all of a corpus up to ₹8 lakh, and ₹6 lakh as a lump sum on a corpus up to ₹12 lakh.
How long can I keep my NPS invested after 60?
Until 85. Since December 2025 the account carries on automatically after 60 or retirement, and you no longer need to give 15 days’ notice to stay in. You can defer the lump sum, the annuity purchase or both until 85, and exit at any point before then. The account’s charges keep running while the money stays invested.
What happens if my pension fund merges my NPS scheme?
A pension fund can now run at most two MSF schemes in each category per tier, and PFRDA gave funds 45 days from 28 August 2026, to 12 October, to merge the extras after telling subscribers. If a scheme you hold is wound up, you can choose another. If you don’t, your money moves to the same fund’s Life Cycle 50 – Moderate scheme in Tier I, which holds up to 50% in equity until 35.
Related
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Sources
- PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025: notified 12 December 2025, in force from publication — Gazette of India No. 808, 15 Dec 2025, and PFRDA copy
- Key amendments to the exit regulations, old and new side by side — PFRDA press release, 19 Dec 2025
- Income-tax Act, 2025: Schedule II entry 6 (the 60% exemption) and section 124(6) (withdrawals and annuity pension taxed as income) — Gazette of India, 21 Aug 2025
- Finance Act, 2026, which amends the Income-tax Act, 2025 but not Schedule II entry 6 or section 124 — Gazette of India, Mar 2026
- PoP charges for common schemes, including NPS Vatsalya and NPS Lite, from 1 January 2026: ₹200 onboarding, 0.20% a year, applicable to existing accounts — PFRDA circular PFRDA/2026/16/REG-POP/01, 10 Mar 2026
- PoP charges for all schemes from 1 October 2026, dormancy by PAN, and the e-NPS exemption — PFRDA circular PFRDA/2026/46/REG-POP/08, 28 Aug 2026
- PoP service charges before 2026 — PFRDA master circular PFRDA/Master Circular/2024/05/PoP-03, updated 31 Jan 2025
- Standardised framework for NPS schemes: five scheme types, MSF categories A to E, NPS Sanchay, change limits, total charges by channel — PFRDA circular PFRDA/2026/47/REG-PF/10, 28 Aug 2026
- Renaming within 30 days, mergers within 45 days, the Life Cycle 50 default on winding up, and the end of the separate MSF circular of 16 September 2025 — PFRDA circular PFRDA/2026/48/REG-PF/11, 28 Aug 2026
- StAR NPS: assisted digital onboarding through PoPs and their agents, charged ₹200 plus taxes — PFRDA circular PFRDA/2026/32/REG-POP/06, 3 Jun 2026
- Draft amendments to the PFRDA (Point of Presence) Regulations, 2018 — PFRDA exposure draft, 2 Sep 2026, and consultation page
- NPS subscribers and assets under management as of 31 March 2026 — PIB, India’s Pension Landscape, 7 May 2026
- NPS annuity rates as of 13 February 2026 — Axis Max Life Insurance, Annuity in NPS
Status as of 12 October 2026. PFRDA changes NPS rules often, so check the circulars linked above, or your record-keeping agency, before acting on this. This is an explanation, not advice about your money or your tax. TLDR Money is not a registered investment adviser and earns no commission on any product mentioned. The worked example is illustrative; your own numbers and tax will differ.