Key Changes in NPS Regulations 2025

Brief Overview of NPS

Before diving directly into changes, it helps to recap the basics. NPS is a government-regulated retirement savings scheme where you invest regularly during your working years and build a pension corpus over time. It’s market-linked, flexible, and open to both salaried and self-employed individuals.² NPS offers two account types:

●      Tier I Account (Primary Account)

• Main retirement account under NPS for long-term savings
• Minimum contribution: ₹500 to open the account and ₹1000 per financial year

●  Tier II Account (Voluntary savings account)

• An optional add-on account, which is allowed only if you have a Tier I account
• No lock-in period
• Minimum contribution: ₹250 to open the account. No minimum contribution limit annually
• Withdrawals are allowed at any time without restrictions
• You can switch to a Tier I account anytime³

 

Latest Changes in NPS Exit and the Withdrawal Rules (2025 Amendment)¹

Let’s take a closer look at the major changes PFRDA has introduced under the 2025 amendment, which apply across different subscriber categories: government, non-government, and NPS-Lite and Swavalamban, while aiming to simplify exits and make withdrawals more subscriber-friendly:

 

1. Maximum Age Limit Increased to 85

In a significant update, the government has extended the age limit for subscribers (government and non-government) continuing in NPS to 85 years. Earlier, once you turned 75, you had to exit the scheme. Now you can remain invested for the next 10 years too and choose to withdraw your corpus either as a lump sum or in a phased manner.

 

2. Reduced Annuity Requirement for Non-Government Subscribers

Earlier, if your accumulated pension wealth (APW) exceeded ₹5 lakh, you were required to use at least 40% of it to purchase an annuity on exit. Under the latest amendment, this requirement has been eased: non-government subscribers now need to allocate a minimum of 20% of their APW towards annuity purchase on retirement or in specified exit scenarios.

 

3. 100% Lump Sum Withdrawal in Select Cases

In a breath of fresh air, both government and non-government subscribers can now withdraw 100% of their NPS corpus as a lump sum if it is ₹8 lakh or less. That said, government subscribers, when choosing to purchase an annuity, need to use at least 40% of their retirement corpus, while non-government subscribers can opt for annuity purchase from a minimum of 20% of their corpus.

 

4. Systematic Unit Redemption (SUR)

Inspired by the Systematic Withdrawal Plans (SWPs) in mutual funds, the government has brought a new withdrawal option in NPS, known as Systematic Unit Redemption (SUR). Available to subscribers whose APW is between ₹8 lakh and ₹12 lakh, this facility allows them to withdraw a lump sum of up to ₹6 lakh and use SUR to gradually redeem the remaining corpus. A key point to remember is that when you choose SUR, you must continue withdrawals for a minimum of six years.

 

5. Introduction of New Corpus Range: ₹8 lakh to ₹12 lakh

To offer more flexible exit options, the PFRDA has added a new withdrawal category for both government and non-government subscribers with APW ranging from ₹8 lakh to ₹12 lakh. The options are: 

1. Take out a maximum of ₹6 lakh in a lump sum and redeem the remaining corpus gradually through SUR over the next 6 years.
2. Withdraw up to an amount of ₹6 lakh in a lump sum and use the remaining accumulated value to purchase an annuity.
3. Opt for a higher lump sum with annuity purchase. The annuity percentage here differs for the private and public sectors:

 i.  Government subscribers can withdraw up to 60% of their accumulated pension wealth as a lump sum (tax-free) and allocate a minimum of 40% to buy an annuity.

 ii.  Non-government subscribers can withdraw up to 80% of the corpus as a lump sum while using a minimum of 20% for annuity purchase.

With this new rule, you now get better control over how to access your retirement funds.

 

1. More Pre-Retirement Withdrawals Permitted

You can now make up to four withdrawals from your NPS account before turning 60 or before retirement, whichever comes later. Each withdrawal must be spaced at least four years apart. Earlier, this limit was capped at three withdrawals, so the new rule offers you a little more flexibility when you need funds before retirement.

 

2. Partial Withdrawals After 60 With a Defined Gap

If you continue with NPS even after turning 60 or after retirement, you can now make partial withdrawals from your account, provided there is a gap of at least three years between each withdrawal. To use this feature, the amount you withdraw cannot be more than 25%, calculated as follows:

 

a. If there is a single contribution source, 25% of the total amount you have invested.

 

b. If there are multiple contribution sources, 25% of your own invested amount only.

 

1. Exit Option After Giving Up Indian Citizenship

   Under the updated rules, if you’re no longer an Indian citizen, you are allowed to close your NPS account and take out the complete corpus in a single payment.

2. Exit Provisions for Missing or Presumed Deceased Subscribers

   The regulator has clarified how NPS benefits will be handled if a subscriber becomes untraceable or is later declared presumed dead. In such cases, the nominee(s) or legal heir(s) can receive 20% of the total pension amount upfront as interim relief. The remaining 80% will continue to stay invested and will be released once the subscriber is officially declared absent and presumed deceased in line with the Bharatiya Sakshya Adhiniyam, 2023.

3. Stronger focus on individual pension accounts

   Under the updated NPS rules, references to a single “Permanent Retirement Account” have been replaced with “each individual pension account.” This shift highlights account-specific ownership and handling, which is significantly relevant for subscribers who maintain multiple accounts.

 

Impact of the 2025 NPS Amendments

Overall, these changes make NPS far more flexible and practical for subscribers. Higher age limits, relaxed annuity requirements, new withdrawal ranges, and clearer exit rules give you greater control over how and when you access your retirement savings. The amendments also bring more clarity for special situations, helping NPS better align with real-life financial needs.

 

Key Takeaways

• NPS is a long-term, market-linked government retirement scheme that helps you build a pension corpus with structured exit and annuity options.
• The governing body, PFRDA, has brought significant reforms in the NPS regulations, starting with increasing the age limit to 85 years from the previous 75.
• The mandatory annuity portion for non-government subscribers has been reduced from 40% to 20%, improving liquidity.
• If your total NPS corpus is ₹8 lakh or less, you can withdraw the entire amount as a lump sum.
• If your corpus ranges between ₹8–₹12 lakh can use Systematic Unit Redemption (SUR) to withdraw the remaining amount gradually after taking a lump sum.
• In the new ₹8 - ₹12 lakh corpus bracket, flexible exit choices are provided: lump sum withdrawals, SUR, or annuity combinations.
• Withdrawal rules before and after 60 have been relaxed, giving you more chances to access funds when needed.

FAQs

1. How long can I stay invested in NPS?

   The latest amendment has increased this limit to 85 years for both the government and non-government subscribers.¹

2. What changes have been made in the annuity limit of NPS?

   As per the latest 2025 amendment, you now need to use only 20% of your accumulated pension wealth to purchase an annuity, down from the earlier 40%. However, this rule has only been relaxed for non-government subscribers.¹

3. Can I withdraw my full NPS amount before retirement?

   If your total corpus is ₹8 lakh or less, you can withdraw the entire amount of the corpus as a lump sum. A larger corpus (₹8 lakh - ₹12 lakh) has other options like phased withdrawals or partial annuity purchase.¹

4. What is Systematic Unit Redemption (SUR)?

   When you’ve a corpus between ₹8–₹12 lakh, you can withdraw a lump sum of up to ₹6 lakh and use the SUR concept to redeem the remaining amount gradually. Once you opt for SUR, you must continue it for a minimum of six years.¹

5. Can I make withdrawals from the APW before and after 60?

   According to the latest amendment 2025, you can now make up to four withdrawals before age 60 (earlier capped at three), with at least four years between each. After 60, partial withdrawals are allowed every three years, up to 25% of your contribution, depending on the investment source.¹

Sources

1.https://pfrda.org.in/web/pfrda/w/pension-fund-regulatory-and-development-authority-exits-and-withdrawals-under-the-national-pension-system-amendment-regulations-2025

2.https://cleartax.in/s/nps-national-pension-scheme

3.https://npstrust.org.in/about-nps