NPS Vatsalya Withdrawal Rules

NPS Vatsalya has specific withdrawal rules designed to ensure the corpus is used for the child's benefit. The rules cover partial withdrawal, exit at age 18, and continuation till age 21.

Partial withdrawal rules

Eligibility

• After 3 years from the date of account opening
• Only for specific purposes: education, treatment of specified illnesses, disability over 75%

Limits

• Maximum 25% of total contributions (excluding returns)
• Up to 2 withdrawals before age 18
• 2 additional withdrawals between ages 18-21 (after KYC completion)

Process

1. Submit a declaration stating the purpose (education, illness, disability)
2. The withdrawal is processed by the CRA
3. Funds are transferred to the subscriber's/guardian's bank account

Exit at age 18

When the minor turns 18, the subscriber has three options:

Option 1: Continue in NPS Vatsalya till age 21

• The account continues under the same terms
• Fresh KYC is mandatory
• The subscriber can make 2 additional partial withdrawals between 18-21

Option 2: Shift to regular NPS

• The entire corpus is transferred to a regular NPS account (All Citizen Model)
• Fresh KYC is mandatory
• The subscriber then follows regular NPS rules (lock-in till 60)

Option 3: Exit the scheme

• If corpus < Rs 8 lakh: Full withdrawal allowed
• If corpus >= Rs 8 lakh: Up to 80% as lump sum + at least 20% for annuity

What happens if no option is chosen by age 21?

If the subscriber does not choose any option by age 21, the account automatically shifts to NPS under a higher-equity scheme under the Multiple Schemes Framework (MSF), with the same Pension Fund Manager. Withdrawals then follow regular NPS rules.

Death of subscriber or guardian

If the subscriber (minor) dies

• The entire corpus is transferred to the guardian/nominee/legal heir
• Option to transfer the proceeds to the NPS account of the guardian/nominee/legal heir

If the guardian dies

• A new guardian must be registered by submitting KYC documents
• The account continues with the new guardian

If both parents die

• A legally appointed guardian may continue the account with or without contributions

Tax implications of withdrawal

Partial withdrawal

• Up to 25% of contributions is tax-exempt under Section 10(12BA)

Exit at 18 (or 21)

• Lump sum withdrawal up to 60% of corpus is tax-exempt
• The annuity portion (20% if corpus >= Rs 8L) is tax-free at withdrawal
• Annuity income is taxable in the year of receipt

Disclaimer

Withdrawal rules are based on PFRDA NPS Vatsalya Scheme Guidelines 2025. Verify with PFRDA before making any withdrawals.

Partial withdrawal: After 3 years, up to 25% of contributions (excluding returns)
Frequency: 2 times before 18, 2 more between 18-21
Exit at 18: Continue till 21, shift to NPS, or exit
If corpus < Rs 8L: full withdrawal
If corpus >= Rs 8L: up to 80% lump sum + at least 20% annuity