In this video we answer the following questions about National Pension Scheme (NPS):
-Can you make partial withdrawals from NPS before retirement?
-When can you partially withdraw from NPS Tier-1 account?
-Can you withdraw your entire corpus at retirement?

Watch our other video: How To Earn 50,000/month From National Pension Scheme (NPS) | Retirement Saving Scheme

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The National Pension Scheme (NPS) is a government-backed scheme in India that aims to provide individuals with a reliable and sustainable source of income during their retirement years. It has gained popularity over the years due to its attractive features such as tax benefits and low cost. However, it is important to be aware of the withdrawal rules, partial exit options, and taxation implications associated with the NPS.

Withdrawal Rules:
The NPS has specific rules that govern the withdrawal of funds from the scheme. Under normal circumstances, an individual cannot withdraw the entire corpus from the NPS before the age of 60. Upon reaching the age of 60, the individual can withdraw up to 60% of the accumulated corpus as a lump sum, while the remaining 40% needs to be utilized to purchase an annuity from an insurance company. This annuity provides a regular stream of income for the individual’s lifetime.

Partial Exit Option:
To cater to unforeseen financial emergencies, the NPS introduced a partial exit option. Under this provision, an individual who has been investing in the NPS for at least three years can withdraw up to 25% of their contributions before the age of 60. However, this withdrawal can only be made for specific reasons such as a critical illness, higher education of children, or purchase of a residential property.

Taxation:
The tax treatment of NPS withdrawals is an important aspect to consider. The lump sum withdrawal at the age of 60 is partially tax-free. As per the current tax regulations, 60% of the lump sum withdrawal is tax-exempt, while the remaining 40% is liable to be taxed at the individual’s applicable tax slab.

On the other hand, the partial exit allowed after three years of investment has its own tax implications. The withdrawn amount is treated as income and taxed as per the individual’s tax slab. It is crucial to keep this in mind while availing the partial exit option, as it may have potential tax implications that can impact the individual’s overall tax liability.

Additionally, the annuity received from the NPS after the age of 60 is also taxable. The income from the annuity is added to the individual’s total income and taxed accordingly. However, it is worth noting that the annuity income qualifies for the standard deduction available under the income tax provisions.

It is advised to consult a financial advisor or tax consultant to understand the specific tax implications based on the individual’s financial situation and tax profile.

In conclusion, the National Pension Scheme (NPS) offers individuals a reliable retirement saving option with its attractive features. However, being familiar with the withdrawal rules, partial exit provisions, and taxation implications is crucial. Stay informed, plan strategically, and make well-informed decisions to secure a comfortable retirement through the NPS.