For years the shape of an NPS exit was fixed in most people's minds, because PFRDA's rules fixed it: at 60 you take 60% in cash and hand at least 40% to an annuity provider, at rates you do not control and cannot renegotiate. That structure was the single most common reason people gave for not putting more into NPS.
In December 2025 it changed — for some subscribers, not all.
What PFRDA actually changed
The Pension Fund Regulatory and Development Authority notified amendments to the PFRDA (Exits and Withdrawals under the National Pension System) Regulations, 2015, and set them out in a press release dated 19 December 2025. Its own framing is worth noting: the amendments are "primarily aimed at the non-government sector (All Citizen Model and Corporate Sector)", with certain provisions rationalised for the government sector.
At normal exit, the headline change is the split:
| Sector | Earlier | Now |
|---|---|---|
| All Citizen and Corporate | Up to 60% lump sum, at least 40% annuity | Up to 80% lump sum, at least 20% annuity |
| Government sector | Up to 60% lump sum, at least 40% annuity | Unchanged |
That asymmetry is the part most coverage skips, and it is the first thing to establish about your own account. If you are a central or state government employee in NPS, almost none of the headline flexibility applies to you.
The change that matters more than 80%
Below the percentage sits a structural change with larger consequences for anyone who joined NPS young.
In the All Citizen model, the vesting period — the subscription needed to qualify for a normal exit — moved from "till 60 years of age" to "15 years or till 60 years of age, whichever is earlier".
Read that again with a date attached. Someone who opened an NPS account at 32 previously had to wait 28 years for a normal exit, or take a premature exit on punishing terms. They now reach normal exit at 47.
For the Corporate sector and the government sector, normal exit remains tied to retirement or superannuation. The 15-year route is an All Citizen model provision.
The small-corpus thresholds, where most accounts actually sit
Percentages stop mattering below a certain size, because the annuity a small corpus buys is not worth the paperwork. PFRDA raised those floors and, at normal exit for non-government subscribers, replaced the single threshold with three bands:
- Corpus up to ₹8 lakh — 100% as a lump sum, or as a Systematic Lumpsum Withdrawal or Systematic Unit Withdrawal. No annuity. The earlier threshold was ₹5 lakh.
- Corpus above ₹8 lakh and up to ₹12 lakh — up to ₹6 lakh as a lump sum with the balance drawn systematically over at least six years, or as an annuity. Alternatively, the standard 80% and 20% split.
- Corpus above ₹12 lakh — up to 80% lump sum, at least 20% annuity.
The middle band is more interesting than it looks. On a ₹10 lakh corpus, the 80/20 route hands over ₹8 lakh and annuitises ₹2 lakh; the other route caps the cash at ₹6 lakh but lets the remaining ₹4 lakh stay invested and be drawn down across six years instead of being converted into an annuity at whatever rate is being quoted that month. Which is better depends entirely on annuity rates on the day — and that is now a choice you get to make.
The government sector kept its 60/40 split but received the same three-band threshold structure.
Premature exit, and the lock-in that vanished
Leaving before the vesting period is a premature exit, and PFRDA's terms for it are deliberately unattractive: up to 20% as a lump sum, at least 80% into an annuity. That did not change.
Two things around it did:
- The minimum lock-in period of five years to be eligible for a premature exit in the All Citizen model has been removed.
- The corpus below which a premature exit can be taken wholly in cash rose from ₹2.5 lakh to ₹5 lakh.
Removing the lock-in is a genuine liberalisation and a genuine risk at the same time. Money that can be reached is money that gets reached — and on the way out, PFRDA still requires 80% of it to buy an annuity.
Four other changes worth knowing about
Entry and exit ages moved to 85. The previous ceiling was a maximum entry age of 70 and an exit age of 75.
Continuation became automatic. The requirement to notify 15 days before turning 60 or superannuating, in order to continue or defer, has been removed across sectors. Nobody loses their position now by missing a form.
Partial withdrawals are more frequent but more spaced. Before 60, the frequency rose from three to four, with a four-year interval required between withdrawals. After 60, there is no frequency cap but a three-year interval applies. The permitted purposes changed as well: medical treatment and hospitalisation was broadened to drop the specified list of critical illnesses and now covers the subscriber, spouse, children and parents, while skill development and starting a business were removed as grounds entirely.
You can borrow against the corpus. A subscriber may seek financial assistance from a regulated financial institution, and the lender may mark a lien or charge on the individual pension account of up to 25% of the subscriber's own contribution — within the partial withdrawal limits. Assignment or pledge of NPS benefits was previously void except where the NPS Trust permitted it. Both this and the new withdrawal purpose that goes with it are to be governed by separate guidelines issued by the Authority.
The gap nobody has closed
Here is the part to take to an adviser rather than to a comment section.
PFRDA regulates the scheme. It does not write tax law. The exemption available on an NPS lump sum at exit has long been framed as 60% of the accumulated pension wealth — a fixed percentage, not a formula that tracks whatever the regulator permits. Raising the withdrawal ceiling to 80% does not automatically carry the exemption up with it.
Unless and until the tax side is aligned, drawing that extra slice may be a taxable event at your slab rate. Nobody sensible should assume otherwise on the strength of a press release about exit regulations, and nobody should assume the worst either. This is a question with a specific answer for your assessment year, and it is worth paying someone to give it to you while the withdrawal is still reversible.
It is worth checking against the regime you are in, too. Employer contributions under section 80CCD(2) survive into the new tax regime while most other deductions do not, which is covered in the deductions that still work under the new regime; the older 80C and 80CCD(1B) routes are set against the new regime in the old versus new walkthrough.
One practical warning
PFRDA's subscriber-facing FAQ pages have been slower to update than its regulations. At the date of review, the All Citizen model exit FAQ still described the 40% annuity minimum and the ₹5 lakh threshold — the position before December 2025.
That is not unusual and it is not a scandal; consolidated regulations and explainer pages move at different speeds. It does mean that if a page, an agent or a calculator quotes you 60/40, the sensible next step is to check the date on it against the amended regulations rather than assume it is current.
What to actually check
- Which model are you in — All Citizen, Corporate, or government sector? Everything above turns on this.
- How long have you been subscribed? In the All Citizen model, 15 years is now a date that matters.
- What is the corpus likely to be at exit? The ₹8 lakh and ₹12 lakh bands change the options available, not just the arithmetic.
- What annuity rate is actually on offer? Taking 80% only beats taking 60% if the money does more outside the annuity than inside it.
- Ask about tax on the portion above 60% before you submit the withdrawal request.
This article describes the exit rules as amended by PFRDA and is general information for an Indian audience. It is not investment, tax or financial advice, and it is not a recommendation to withdraw, to remain invested, or to buy any annuity. The provisions summarised here are the broad key amendments PFRDA itself describes as indicative rather than exhaustive; the full regulations govern your account. Confirm your own position with your point of presence, the CRA, and a qualified tax adviser before acting.
Sources
- PFRDA — Press release: key amendments in the Exits and Withdrawals Regulations, 19 December 2025 (opens in a new tab)
- PFRDA — Exits and Withdrawals under the NPS (Amendment) Regulations, 2025 (opens in a new tab)
- PFRDA — Exits and Withdrawals under the NPS Regulations, 2015, as last amended on 16 December 2025 (opens in a new tab)
- PFRDA — FAQs on exits for the All Citizen Model (opens in a new tab)
- PFRDA — FAQs on exits for the Government Sector Model (opens in a new tab)
- Income Tax Department — Tax free incomes (opens in a new tab)
This article is general information for an Indian audience and reflects the PFRDA exit regulations as amended in December 2025 and published on pfrda.org.in at the date of review. It is not investment, tax or financial advice. Exit terms differ by sector and model, thresholds and percentages can change, and the tax treatment of a withdrawal depends on provisions of income tax law that PFRDA does not set. Confirm your own position with PFRDA, your CRA and a qualified tax adviser before relying on any of this. Last reviewed 16 September 2026.
