The National Pension System (NPS) is a pension scheme for Indian citizens. It is one of the most flexible schemes available for long-term financial planning with various deposit and withdrawal options. It allows subscribers to withdraw money from the account partially for certain purposes or contingencies, such as higher education or marriage of children, purchase or construction of the house, medical treatments, starting their own ventures, and skill development or self-development activities.
In today's world, with several options available to re-skill or up-skill oneself online or offline, NPS's partial withdrawal option may be useful.
What Are Self-Development Activities That PFRDA Permits For Partial Withdrawal?
The Pension Fund Regulatory and Development Authority (PFRDA) allows partial withdrawal for the following purposes:
Higher education and marriage of subscribers' children, including a legally adopted child
House (residential house or flat) purchase or construction, whether it's in the subscriber's name alone or jointly with a legally wedded spouse. In case of owning one house other than ancestral property, withdrawal will not be permitted.
Medical treatment (hospitalisation and treatments) of specified illnesses. The diseases include cancer, major organ transplant, kidney failure, primary pulmonary arterial hypertension, multiple sclerosis, aorta graft surgery, coronary artery bypass graft, heart valve surgery, stroke, coma, total blindness, myocardial infarction, paralysis, COVID-19, and accidents of life-threatening nature.
Medical expenses due to disability or incapacitation
Expenses for skill development, re-skilling, or any other self-development activities
Expenses for establishing a venture or start-up by the subscriber
Among all these reasons, skill development is a bit ambiguous, and one should gain clarity before applying for withdrawal.
Note that PFRDA does not specify any course but accepts the withdrawal request only when the course is offered by a recognised university, organisation or approved by the All India Council for Technical Education (AICTE), University Grants Commission (UGC), National Institute of Securities Markets (NISM), National Institute of Bank Management (NIBM), The Institute of Chartered Accountants of India (ICAI), Indian Institutes of Management (IIM), or other such educational institutions. Further, it mentions that the duration of these courses should not be less than three months.
How Useful Is NPS Withdrawal For Self-Development?
As NPS is offered by the employers as well, this option is useful not only for employees but also for employers.
Says Rajesh Khandagale, SVP – NPS, KFin Technologies: "Self-development/Skill Development/Re-skilling" of NPS Subscriber defines the value addition to the NPS Subscriber in terms of knowledge and acquiring new skills related to job and personality development."
"Value addition in the skills of a subscriber not only adds value for the organisation but also for the development of the subscriber to increase the opportunity for his/her professional career by gaining higher education/professional qualifications/technical courses, etc. It also enables the subscriber to undergo, in or out of India, a special course consisting of higher studies or specialised training in a professional or a technical subject and having a direct and close connection with the sphere of his duty."
How Much Can One Withdraw?
PFRDA allows a maximum of 25 per cent withdrawal of the subscriber's contribution made until the date of presenting withdrawal request.
When Can One Withdraw Money?
A subscriber should have been invested in NPS for at least three years to become eligible for partial withdrawal. Also, note that these partial withdrawals are allowed only three times during the entire subscription period.
What Is The Process?
To withdraw money partially, the subscriber needs to fill out the request online, provide a self-declaration, attach the specified documents along with it, and submit. Else, one can submit a withdrawal request offline to the service provider.
So, if you have NPS account, and want to pursue a course, you may consider withdrawing from the NPD corpus instead of taking loan for the course.
