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6 July 2026

NPS withdrawal rule changes

The National Pension System (NPS) is a major government-mandated social security scheme, and these specific regulatory changes regarding withdrawal norms and taxation are directly relevant to governance and welfare policy questions in GS2.

2 min read Day 1 of 3 2 questions 2 prelims

Notes

  • PFRDA amended NPS exit/withdrawal norms in December 2025 to increase liquidity for subscribers.
  • Mandatory annuity portion reduced from 40% to 20% of the total corpus.
  • Lump sum withdrawal limit increased from 60% to 80% for subscribers with a corpus above ₹12 lakh.
  • For corpus up to ₹8 lakh, 100% lump sum withdrawal is permitted.
  • For corpus between ₹8-12 lakh, up to ₹6 lakh can be withdrawn as lump sum, with the remainder in annuity or structured withdrawal.
  • Taxation: Section 10(12A) of the Income Tax Act currently exempts only 60% of the withdrawn corpus; the additional 20% is subject to slab-rate taxation.
  • Retirement Income Scheme (RIS) introduced for the non-annuity portion to allow gradual drawdowns while the balance remains invested.
  • RIS payout methods: Systematic Lump Sum Withdrawal (SLW) for fixed periodic amounts, and Systematic Unit Redemption (SUR) for variable amounts based on NAV.
  • RIS offers lower expense ratios compared to Mutual Fund Systematic Withdrawal Plans (SWP) but provides more limited fund choices.

Part of a longer story

This is day 1 of 3 in NPS withdrawal and exit rule revisions, which has been running since 6 July 2026. Reading it whole is usually worth more than reading today alone — the exam asks how something developed.

Questions

  1. Analyze the recent reforms in the National Pension System (NPS) withdrawal norms and discuss how the introduction of the Retirement Income Scheme (RIS) aims to address the challenges of longevity risk and income security for retirees. 150 words
    Attempt this — 150 words in 8 min
    0 / 150 words 8:00
  2. The transition from a mandatory annuity-heavy structure to a flexible withdrawal model in the National Pension System reflects a shift in retirement planning responsibility. Evaluate the implications of this policy change for individual financial autonomy and the necessity of aligning tax laws with evolving pension regulations. 250 words
    Attempt this — 250 words in 11 min
    0 / 250 words 11:00

Prelims

  1. Under the revised PFRDA norms for NPS, what is the mandatory annuity portion for a subscriber with an accumulated corpus above ₹12 lakh?

  2. Which of the following statements regarding the Retirement Income Scheme (RIS) is correct?

Syllabus

Topics

Sources

250words.in · https://250words.in/daily/2026-07-06/nps-withdrawal-rule-changes