The biggest change: non-government NPS subscribers can now withdraw up to 80% of their corpus as a lump sum at retirement, with only 20% going to a mandatory annuity. This is a reversal from the old 60/40 split. PFRDA also raised the maximum age to stay invested from 75 to 85, introduced a new Retirement Income Scheme (RIS) that lets you keep your money invested post-retirement, and added a 15-year exit route for non-government subscribers. These changes were notified on 16 December 2025 via the PFRDA (Exits and Withdrawals) Amendment Regulations, 2025.
Here's what changed, what stayed the same, and which scenario applies to you.
What Changed: Old Rules vs New Rules
| Parameter | Old Rules (Pre-Dec 2025) | New Rules (Dec 2025 onwards) |
|---|---|---|
| Mandatory annuity (non-govt) | 40% | 20% |
| Max lump sum (non-govt) | 60% | 80% |
| Max age to stay in NPS | 75 years | 85 years |
| Exit eligibility (non-govt) | Age 60 only | Age 60 OR 15 years of subscription |
| 100% withdrawal threshold | Corpus ≤ ₹2.5 lakh | Corpus ≤ ₹8 lakh |
| Lump sum withdrawal method | One-shot only | One-shot, SLW, SUR, or RIS |
| Post-retirement market returns | Not available | RIS Steady fund (equity glide path till 85) |
For government subscribers, the split remains 60% lump sum / 40% annuity at normal exit.
The 5 Exit Scenarios
1. Normal Exit at Age 60 (or after 15 years)
Non-government subscribers can take up to 80% as lump sum and must put 20% into an annuity. If your corpus is ₹8 lakh or less, you can withdraw 100% with no annuity requirement. Government subscribers still follow the 60/40 rule.
→ NPS Exit at 60: How Much Can You Withdraw?
2. Premature Exit (Before 60 AND Before 15 Years)
This is where it gets punitive. If your corpus exceeds ₹5 lakh, you can only take 20% as lump sum — the remaining 80% is forced into an annuity. The ratio flips against you. This catches anyone who joined NPS young and wants to leave before completing 15 years.
→ NPS Premature Exit Before 60: The Rules Nobody Warns You About
3. The 15-Year Escape Hatch
Non-government subscribers who complete 15 years of subscription can exit even before age 60 — and it counts as a normal exit. That means the favorable 80/20 split applies. If you joined at 25 and stay till 40, you qualify.
→ NPS Premature Exit Before 60: The Rules Nobody Warns You About
4. Death of Subscriber
100% of the corpus goes to the nominee as a lump sum. No mandatory annuity purchase required. The nominee can also opt for phased payouts via SLW or SUR.
5. Partial Withdrawal (While Still Invested)
You can withdraw up to 25% of your own contributions (not total corpus) while still in NPS — up to 4 times before age 60, with a minimum 3-year subscription and 4-year gap between withdrawals. Only permitted for specific reasons like children's education, first house purchase, or medical treatment.
→ NPS Partial Withdrawal Rules
The Big New Addition: Retirement Income Scheme (RIS)
Launched on 15 May 2026, RIS is a game-changer for how you take your lump sum portion. Instead of withdrawing everything at once, you can keep it invested in a dedicated lifecycle fund (RIS Steady) and draw it down gradually till age 85.
The RIS Steady fund starts with 35% equity at age 60 and glides down to 10% by age 75. You get monthly, quarterly, or annual payouts using either:
- SPR (Systematic Payout Rate): A formula-based drawdown — at age 60 with end age 85, you withdraw 4% per year, increasing as you age.
- SUR (Systematic Unit Redemption): Equal units redeemed each period regardless of market value.
This means your retirement corpus can continue earning market-linked returns instead of being locked into a fixed annuity or sitting in a savings account.
→ NPS Retirement Income Scheme (RIS) Explained
The Tax Catch: 60% vs 80%
PFRDA now allows 80% lump sum withdrawal, but the Income Tax Act (Section 10(12A)) only exempts 60% of the corpus from tax. The extra 20% — between 60% and 80% — does not have a clear tax exemption as of June 2026. This mismatch hasn't been resolved yet, and the additional 20% may be taxable at your slab rate.
→ NPS Withdrawal Tax Rules: The 60% vs 80% Problem
Which Scenario Applies to You?
| Your Situation | What Happens | Read This |
|---|---|---|
| Turning 60 (or completed 15 years), non-govt | 80% lump sum, 20% annuity | Exit at 60 Guide |
| Turning 60, government subscriber | 60% lump sum, 40% annuity | Exit at 60 Guide |
| Want to leave before 60 AND before 15 years | Only 20% lump sum, 80% forced annuity | Premature Exit Rules |
| Completed 15 years but under 60 (non-govt) | Treated as normal exit — 80/20 in your favor | Premature Exit Rules |
| Want to keep money invested after 60 | RIS lets you draw down till 85 with market returns | RIS Explained |
| Need money now for education/house/medical | Partial withdrawal — up to 25% of own contributions | Partial Withdrawal Rules |
| Confused about tax on the 80% withdrawal | 60% is tax-free, extra 20% may be taxable | Tax Rules |
Sources: PFRDA (Exits and Withdrawals) Amendment Regulations 2025 (notified 16 Dec 2025), PFRDA Circular PFRDA/2026/31/MWnR/01 (15 May 2026), Income Tax Act Section 10(12A), NPS Trust (npstrust.org.in).
Disclaimer: This article is for informational purposes only. Tax rules are subject to change — consult a tax professional for advice specific to your situation. Arth helps you track your NPS alongside all your other investments in one place — visit askarth.com to see your full financial picture.
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