So you’re turning 60, your NPS account looks healthy, and now you have a decision to make: take a big chunk of cash at once, or let it drip-feed to you over time.
Most people go with the lump sum because it feels straightforward. But here’s the thing — the rules changed in late 2025, and the old way of thinking about NPS exit might not be the best fit anymore.
Let me walk you through it.
The short version
SLW lets you take your permitted lump sum — usually up to 60 percent of your corpus in the old framework — in installments rather than a single cheque. You choose monthly, quarterly, half-yearly, or yearly. And you don’t have to lock yourself into an annuity right away. In some cases, you can wait until you’re 85 before buying one.
But wait — didn’t the rules change?
Yes. Before December 2025, the standard was the “60:40 rule” — withdraw up to 60 percent, put the remaining 40 percent into an annuity. That was the default for years.
What changed: in December 2025, PFRDA brought out the NPS Exits and Withdrawals Amendment Regulations. For many non-government subscribers, the new deal is up to 80 percent lump sum and as little as 20 percent into an annuity. Government employees may still follow the older ratio, so check your subscriber type.
| What | Earlier Rule | Current (Non-Govt, post-Dec 2025) |
|---|---|---|
| Max lump sum | 60% | Up to 80% |
| Minimum annuity | 40% | As low as 20% |
| Defer buying annuity | Till 75 | Up to 85 |
| How you take it | One shot or systematic | SLW option still available |
Who is this for?
Anyone retiring or turning 60 with an NPS account. You can start SLW right at superannuation or after you hit 60. If you’re a non-government subscriber, you can often defer annuity purchase up to age 85. But you have to complete the exit request with your CRA first, and a cooling period of about 30 days kicks in after that.
How much can you take?
SLW lets you spread the permitted lump sum over time. If your total corpus is small — say under Rs 5 lakh — you may be able to withdraw the whole thing depending on the rules that apply to you.
You pick your frequency: monthly, quarterly, half-yearly, or yearly. You also decide between setting the tenure based on your age, or based on how much you want per installment.
What does the process look like?
Honestly, it’s not as complicated as it sounds.
- Log into your CRA portal (NSDL or KFintech).
- Go to Initiate Request and pick Systematic Lump Sum Withdrawal.
- Choose your frequency, start date, and how much per installment.
- Verify with OTP or Aadhaar eSign.
- Submit.
- The money lands in your bank account in about T+2 days after each installment.
The tax part — pay attention here
This is where it gets a little tricky, and honestly, you should double-check with your tax person before committing. But here’s the current position:
- Section 10(12A) of the Income Tax Act exempts the lump sum, but only up to 60 percent of your corpus. That’s the safe zone.
- If you withdraw more than 60 percent under the new 80 percent option for non-government subscribers, the extra 20 percent doesn’t have a clear exemption right now. It could be taxed under general provisions unless the law is amended.
- Section 10(12B) deals with partial withdrawals and related allowances.
- Section 80CCD(5) is the route for annuity purchase deductions.
- Once the annuity starts paying you, that income is taxable in the year you receive it.
So if you’re a non-government subscriber looking at the new 80 percent withdrawal: the first 60 percent is covered by 10(12A). The remaining 20 percent? Ask your tax advisor whether it’s exempt or taxable, because the law hasn’t quite caught up with the PFRDA amendment yet.
An example to tie it together
Take Ramesh. He’s 60, has an NPS corpus of Rs 80 lakh.
Under the old 60:40 framework, he’d take Rs 48 lakh as lump sum and put Rs 32 lakh into an annuity. Under the new rules (if eligible), he could take up to Rs 64 lakh and annuitise only Rs 16 lakh.
If he picks SLW, he might take Rs 40,000 monthly instead of a lump sum, and defer the annuity purchase to age 70, 75, or later. That keeps more money invested. But he needs to know: of that Rs 64 lakh withdrawal, Rs 48 lakh falls under the clear 10(12A) exemption. The extra Rs 16 lakh? That’s the grey area he should sort out with his CA.
What to do next
- Log into your CRA portal and check what subscriber type you are — government, non-government, or corporate.
- Confirm whether the 80/20 exit path applies to you after the December 2025 changes.
- Talk to your tax advisor about how much of an 80 percent lump sum is actually exempt right now.
- Decide if you want the whole amount at once, or systematic payments that mimic a monthly pension.
- Keep your bank and KYC details updated — wrong account numbers delay everything.
- Save every SLW transaction receipt for your ITR filings.
The bottom line
The old 60:40 rule is not the full picture anymore. Many non-government subscribers can now access up to 80 percent and defer annuities to 85. But on the tax side, the clearest exemption still covers only the first 60 percent under Section 10(12A). Anything above that needs a conversation with someone who knows the latest. SLW itself just turns that withdrawal into a stream of payments instead of one big cheque — useful if you’re worried about managing a lump sum in retirement.
Sources: This draws from PFRDA Circular No. PFRDA/2023/30/SUP-CRA/10 (27 Oct 2023), the PFRDA Exits and Withdrawals under NPS Amendment Regulations, 2025, and the Income Tax Act Sections 10(12A), 10(12B), and 80CCD(5). Rules differ by subscriber category, so confirm your limits and deferral age with your CRA or advisor. This is educational content, not personalised financial advice.
