# NPS Vatsalya Withdrawal Rules at 18 and 21

*Rules in force as at 1 October 2026, verified against the NPS Vatsalya Scheme Guidelines 2025 and PFRDA notification PFRDA/2026/14/NPS-Vatsalya/02 (effective 23 February 2026). Tax positions stated for AY 2027-28 under the Income-tax Act, 2025.*

You put the money in. It was your salary, your account, your decision. So when the hospital bill lands or the fee notice arrives, of course you think you can take some of it back out.

Before your child turns 18, you largely cannot. That is the part of NPS Vatsalya that surprises people most, and it is worth knowing before you need it rather than on the day.

## This has changed: what the 2024 rules said

If your information says any of the following, it describes the old rules.

*Superseded 2024 rules against the rules in force from 23 February 2026.*

| Old (2024) | In force since 23 Feb 2026 |
|---|---|
| At least 80% to annuity | **At least 20%** to annuity |
| Full cash below ₹2.5 lakh | **Full cash below ₹8 lakh** |
| Three partial withdrawals | **Two** before 18 |
| Minimum ₹1,000 a year | **₹250** to open, ₹250 a year |
| Decide within ~3 months of 18 | **Up to 3 years** — until 21 |

Vatsalya launched on **18 September 2024**, announced in the Union Budget 2024-25 — a date widely reported as 1 April 2024. The rules then moved twice: PFRDA notified amendments to the NPS exit regulations on 12 December 2025, issued the **NPS Vatsalya Scheme Guidelines 2025** on 7 January 2026 (circular PFRDA/2026/02/NPS-Vatsalya/01), and brought them into force on **23 February 2026** (notification PFRDA/2026/14/NPS-Vatsalya/02). The tax law moved alongside them — the Income-tax Act, 2025 replaced the 1961 Act entirely on 1 April 2026.

## The short answer

- **Before 18:** three stated reasons only, capped at **25% of contributions (returns excluded)**, **twice** in total.
- **After 18:** up to **80% as cash**, minimum 20% annuitised, and **below ₹8,00,000 no annuity at all.**
- **Tax:** not tax-free, and the pre-18 position only changed on 1 April 2026. Each position names its Act and year.

### Two words first: corpus and annuity

The **corpus** is everything in the account — your contributions plus what they have grown to. It is the number every other rule divides into. An **annuity** is a lump sum handed to an insurer in exchange for a pension paying out over time: the money buys the pension and leaves the account. If the scheme itself is new to you, [NPS Vatsalya for Minors: the complete guide for parents](/nps-vatsalya-minors-complete-guide-2026/) covers how the account is opened and what it is.

## The expensive misunderstanding

A parent opens NPS Vatsalya for a nine-year-old. Seven years pass, a medical bill lands or college fees fall due, and the parent thinks: *I raised the money, so I can take it out.*

Before your child turns 18, that money is not a savings account you can dip into. It comes out for **three reasons only** (Guidelines 2025, ¶13.1(i) — listed below), and in all three the beneficiary is **your child**. Your own medical bill does not qualify. Your own college fee does not qualify.

If that limit feels like the scheme is treating you like an outsider when the risk you are carrying is yours, that is a fair reading. The account is in your child's name, and the withdrawal rights that come with it are the child's. It is not a judgement about you.

## Before 18: what you can and cannot withdraw

| What the rule is | Guidelines 2025, paragraph |
|---|---|
| Lock-in — only after **at least 3 years** from the date of opening | ¶13.1(ii)(a) |
| Cap per withdrawal — **25% of contributions, excluding returns** | ¶13.1(ii)(b) |
| Times before 18 — **not more than 2**, in the whole period until 18 | ¶13.1(ii)(c) |
| Times, 18 to 21 — up to **2 additional**, after 18 and completing KYC | ¶13.1(ii)(d) |
| Evidence — **a declaration.** No supporting documents required. | ¶13.1(ii)(b) |
| Who files — the subscriber **or the guardian** | ¶13.1(ii)(a) |
| Full exit before 18 — **not available.** No clause permits it. | — |

*The partial-withdrawal rules under the NPS Vatsalya Scheme Guidelines 2025. Rules in force from 23 February 2026.*

### How much can I withdraw before 18?

Before your child turns 18, an NPS Vatsalya partial withdrawal is allowed for three purposes only: education of the minor subscriber, treatment of specified illnesses of the minor, and disability of more than 75% of the minor. Each withdrawal is capped at 25% of contributions, excluding returns, and may be taken at most twice before the child turns 18.

The cap is on what you put in, not on what it has become. Contribute ₹7,50,000, watch it grow to ₹10,00,000, and the most you can take is **₹1,87,500 per withdrawal** — ₹3,75,000 across the two permitted before 18. The returns alongside are untouchable. You will see "25% of the corpus" quoted, and "50%" more often still; the second was never right.

One thing this article does not resolve: the three purposes are described for withdrawals before 18, while the two additional withdrawals between 18 and 21 are counted separately under ¶13.1(ii)(d). What may be withdrawn for in that window is not stated here — ask your Point of Presence.

### What evidence do you need to prove it?

A declaration. That is the whole requirement. The governing document says, in as many words, "This facility is available on a declaration basis," and stops. Fee receipts and hospital bills are intermediary practice, not regulation.

If the child dies before 18, the corpus goes to the guardian, nominee or legal heir, with an option to move it into their own NPS account (¶13.3(i)) — the only pre-18 termination route, and not treated as the parent's income. There is no "special circumstances" exit with PFRDA approval, though several blogs describe one.

## At 18: the automatic split

After 18, up to **80% of the corpus can come out as cash**, and the minimum **20% must buy an annuity** from a PFRDA-empanelled Annuity Service Provider (ASP). Below a corpus of **₹8,00,000**, everything can come out as cash with no annuity required. Paragraph 13.2 then opens three options, all elective — there is no default.

*The three options paragraph 13.2 opens on the child's 18th birthday. All three are elective; there is no default.*

| Option at age 18 | What happens to the corpus | When parents typically use it |
|---|---|---|
| **(a) Continue in NPS** | The entire pension wealth shifts seamlessly to the All Citizen Model or another applicable model | The child wants an ordinary NPS account and a long runway |
| **(b) Exit** | **Up to 80%** as lump sum; **the balance must buy an annuity plan from an ASP** | Corpus ₹8 lakh or more, cash wanted now |
| **(c) Exit in full** | The **entire** corpus as lump sum if it is **less than ₹8,00,000** | The typical Vatsalya case |

### Which of the three options applies to you?

Most readers are in row three: a typical corpus of ₹50,000 to ₹5 lakh sits below ₹8 lakh. And **the threshold is per child, not per family** — it is tested on the corpus *in that one account*. Two children at ₹50,000 a year each end up with two accounts of ₹7,96,871, both under it; one child at ₹1,00,000 a year clears it comfortably. That is the opposite of the ₹50,000 deduction cap, which *is* shared across your own NPS and every child's account. The cap is shared; the threshold is not — and it moves with your return, so a contribution clearing ₹8 lakh at an illustrated 10% does not clear it at 8%.

**And official documents disagree at the boundary.** The Guidelines (¶13.2(iii)(c)) say "less than Rs. 8 lakh" — strictly less; PFRDA's scheme page and a PIB release say "less than or equal to." At exactly ₹8,00,000 the reading decides between 100% cash and 80/20, and this article follows the Guidelines because the Guidelines govern. The ₹8 lakh threshold in the senior-citizen framework is a different provision with a similar number — [the Rs 8 lakh full-withdrawal rule, explained](/nps-full-withdrawal-8-lakh-rule/) — and the two should not be read as one.

**The deadline nobody notices.** You have **up to three years** from the 18th birthday — until 21 — to act, and if nothing is done by then the Vatsalya exit options **cease to apply** and the account falls back to the 2015 Regulations (see *At 21 and after*). The 18th birthday does not force a decision. But 21 does, and it is one nobody made.

**Who files it, and how.** From 18, **the child files it, not the parent.** Fresh KYC (know-your-customer checks) and nominee details in the child's own name gate the exit, and no withdrawal is permitted until they are verified; before 18 it is the other way round, with the guardian filing. Either way the application goes to the subscriber's **Point of Presence (PoP)** — the bank or institution where the account was opened — or online via the **eNPS platform**, the Central Recordkeeping Agency's (CRA) web login and mobile app. The CRA holds the records; NPS Trust manages the scheme on PFRDA's behalf.

## How to choose an annuity at 18

**What the rules say, and what they don't.** Paragraph 13.2(iii)(b) requires only that the balance "must be reinvested in an annuity plan from an ASP." It does **not** specify variants, and does not mention a deferred annuity or an Investment-linked Annuity. For how the annuity side of an NPS exit works in general, see [NPS withdrawal rules 2026: the 80% lump sum and 20% annuity explained](/nps-new-withdrawal-rules-2026-80-percent-lumpsum-tax-trap/). Whether either is available at a Vatsalya exit is **not addressed by any official document located** — treat it as open and ask PFRDA. The 2024 carve-out for 100% cash if no empanelled ASP offered an annuity is **gone.**

**The difference that matters is whether your principal comes back on death.** Some structures return the purchase price to the estate or nominee on death; others do not, and the principal is spent. That is the mechanism to compare — not the headline payout rate. PFRDA's position is that rates are insurer-set, not regulated, and vary across providers. No rate is quoted here because no current rate card was available.

### What annuity options exist?

- Annuity for life
- Life with return of purchase price
- Life with 100% annuity to spouse
- Life with 100% to spouse with return of purchase price
- A family income option

**That is PFRDA's general ASP list, not a confirmed menu for a Vatsalya exit.**

Ask each ASP three questions: does the principal return on death, and under what conditions; is there a waiting period before the first payment; and what is charged at purchase and annually?

**The lock-in question — and the one that actually matters.** Annuities lock money away at the moment a young adult most needs it. But on a typical corpus below ₹8 lakh **there is none to lock:** the child takes 100% cash, exits with **no pension arrangement at all**, and faces every retirement decision from zero. That is the harder problem, and this article will not pretend otherwise.

## At 21 and after

**18 opens the choice. 21 closes it and triggers the default.** There is no separate 21st-birthday event with new rights. If nothing was exercised, the account is deemed shifted to the high-risk Multiple Schemes Framework variant and runs under the 2015 Regulations, where full withdrawal is available if accumulated pension wealth is **₹5,00,000 or less**. *(PFRDA All Citizen Model exits FAQ, March 2026.)*

## Tax

**Name the Act and the year.** The **Income-tax Act, 2025** came into force **1 April 2026**, repealing the 1961 Act: FY 2025-26 and earlier = 1961 Act, **FY 2026-27 onward (AY 2027-28 and later) = 2025 Act.** Everything below is FY 2026-27 onward unless stated. *One caveat worth seeing rather than inheriting: the CBDT tax-free-incomes page and the Memorandum to the Finance Bill, 2025 date the point 2 exemption to "AY 2026-27 and subsequent assessment years," while the convention for a 1 April 2026 amendment is AY 2027-28. This article follows the convention; mid-transition, ask your CA which year your return falls in.*

### Is an NPS Vatsalya withdrawal taxable?

An NPS Vatsalya withdrawal is not tax-free. Under the Income-tax Act, 2025, for AY 2027-28 and later, only 60% of the corpus is exempt on closure, and the remaining 40% is taxable as ordinary income in the year of receipt.

The 60% ceiling dates from **1 April 2025** (Finance (No. 2) Act, 2024, amending s.10(12A)), at Schedule II, Table S. No. 6 of the 2025 Act. Three further positions matter:

1. **A pre-18 partial withdrawal is now exempt, and was not before.** *To 31 March 2026:* taxable under s.80CCD(3) of the 1961 Act, which deemed the amount received on closure, "together with the amount accrued thereon," to be the parent's income — your deduction was clawed back, with no rebate for the child's education or medical costs. *From 1 April 2026 (AY 2027-28 onward):* exempt up to **25% of contributions made** — Finance Act, 2025 clause (12BA) in s.10 of the 1961 Act, now Schedule III, Table S. No. 4 in the 2025 Act.
2. **Your deduction is ₹50,000 aggregate, not per child.** Section 124(4) of the 2025 Act (was s.80CCD(1B)), inserted by the **Finance Act, 2025** with effect from 1 April 2026, **shared across your own NPS and every minor's Vatsalya account**, and **old-regime only.** The old s.80CCD(1B) covered a contribution to a *minor's* pension account; s.80CCD(2) was the employer's contribution to an *employee's own* account. Two different things, commonly merged into one. [How the NPS deduction is actually claimed on your return](/nps-80ccd1b-tax-deduction-itr-filing-guide/) is covered separately.
3. **Employer contributions:** the law does not provide for these on a Vatsalya account. Section 124(1) (was 80CCD(2)) is framed as an *employee* contributing to *his own* account, and a Vatsalya account belongs to a minor. *(Inferred from the statutory wording plus the silence of the Guidelines and both PFRDA/NPS Trust tax tables — not an express prohibition.)*
4. **The annuity purchase is exempt at purchase — but only if bought in the same tax year as the withdrawal.** Section 124(9) deems no receipt "if such amount is used for purchasing an annuity plan **in the same tax year**." Defer it and the deemed receipt applies. The pension itself is then fully taxable as income from other sources. On the minor's death, amounts received by a parent, guardian or nominee are not deemed income (s.124(8)).

*Every point above is a position to confirm with your chartered accountant for your assessment year. Tax law here changed twice in twelve months.*

## Worked example

Two families, ten years, contributions at the end of each financial year, at a **flat 10% annual effective return** — an arithmetic illustration, **not a projection**, on a market-linked product where returns are **not guaranteed.** The rows sit either side of ₹8 lakh: same scheme, opposite outcomes.

*Illustrative only, at a flat 10% annual effective return. Returns are market-linked and not guaranteed.*

| Contribution per year | Corpus at 10 years (at 10% illustrated return) | Path | Lump sum | Annuity | Taxable (40%) |
|---|---|---|---|---|---|
| ₹30,000 | ₹4,78,123 | under ₹8L → **100% cash** | ₹4,78,123 | none | ₹1,91,249 |
| ₹75,000 | ₹11,95,307 | over ₹8L → **80/20** | ₹9,56,245 | ₹2,39,061 | ₹4,78,123 |

The last column is a flat 40% of the corpus — the 60%-exempt ceiling is Schedule II, S. No. 6 — charged as ordinary income in the year of receipt (AY 2027-28 onward), not the excess over contributions. One family ends with **₹4.78 lakh of cash and no pension arrangement at all.** The other is **forced into ₹2.39 lakh of annuity** it did not choose. The threshold alone decides which.

**A different family, on the pre-18 path.** At ₹30,000 a year, by year 5 it has contributed ₹1,50,000. The most it can ever extract before the child turns 18 is 25% of that, twice — **₹75,000** — and the returns alongside cannot be touched at all.

## Pending rule changes

**None to report on the annuity split** — that sequence is in the box at the top. Three items stay unsettled and are **not** resolved here: annuity variants at a Vatsalya exit; the ₹8 lakh boundary wording across three official documents; whether SLW/SUR apply. None has a consultation paper, and **none should be called "proposed."**

## Risks and limits

- **On a small corpus, charges bite.** On a ₹2 lakh corpus a ₹150 p.a. CRA AMC alone is 0.075% a year, before the ASP's own; annuity charges are provider-set and PFRDA publishes no rate card.
- **No published service standard** for how long an exit takes. The 30-day window in PFRDA's grievance regulations is a redressal deadline, not a processing estimate.
- **Exit is irreversible.** Read the current document, not a summary — including this one. The [full NPS withdrawal rules for 2026](/nps-withdrawal-rules-2026/) set out the senior-citizen position that this article's Vatsalya rules sit apart from.

## What to do this week

1. **Put the dates on one sheet:** 3 years from opening (first withdrawal possible), the 18th birthday (three options, KYC due), and 21 (window shuts, default shift).
2. **Open the account on the child's own bank account now**, or a joint one — [and check whether the scheme fits your family first](/nps-vatsalya-scheme-child-retirement-account-guide/) — optional at opening for Indian residents, mandatory for NRI/OCI minors, and mandatory at withdrawal or exit either way.
3. **Check your ₹50,000.** It is aggregate across your own NPS and every child's account — two children do not mean ₹1,00,000 of room.
4. **Sort the child's KYC and nominee details early**, in the child's own name. They gate every withdrawal at 18.
5. **Have the conversation with your child before they turn 18.** Not a document task. The money is legally theirs the moment they turn 18; after that your input is advice only. Tell them what the corpus is likely to be, whether it clears ₹8 lakh, and what an annuity means — before they are the one deciding. They will have opinions, which is the point of doing this early rather than in the birthday week.
6. **Ask PFRDA, not a search engine,** about annuity variants and SLW/SUR at a Vatsalya exit, using Pension Sahayak (pensionsahayak.pfrda.org.in) if the answer is unsatisfactory.
7. **If your child, or you, are abroad,** the Guidelines do not say who executes the exit or how funds are repatriated. Ask your PoP directly rather than guessing.

## Key takeaway

The pre-18 restriction is arithmetic, not bureaucracy: **25% of contributions, twice, for the child's education, specified illness or 75%-plus disability only.** After 18 the split is far friendlier than you have read, but on a typical corpus under ₹8 lakh there is no annuity requirement at all — so **most families get the money and no pension.** Know which situation you are in, and start the conversation while you still can. If the wider question is where a child's savings should sit alongside other instruments, [SIP vs FD vs NPS Vatsalya](/sip-vs-fd-vs-nps-vatsalya-best-investment-guide-parents-professionals/) works through the trade-offs.

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### Sources

- PFRDA, **NPS Vatsalya Scheme Guidelines 2025** (¶¶7, 9, 13.1, 13.2, 13.3) — pfrda.org.in/documents/33652/153574/
- PFRDA (Exits and Withdrawals under NPS) (Amendment) Regulations, 2025 — Gazette No. 808, CG-DL-E-16122025-268548, 15 Dec 2025
- PFRDA circular PFRDA/2026/02/NPS-Vatsalya/01 (7 Jan 2026); notification PFRDA/2026/14/NPS-Vatsalya/02, effective 23 Feb 2026
- PFRDA: **Vatsalya scheme page**; **FAQs – Exits & Withdrawals from NPS for All Citizen Model** (updated March 2026); ASP page and empanelment list (NPS Trust)
- PIB PRID 2214246 (13 Jan 2026); PRID 2248005
- NPS Trust FAQ for NPS Vatsalya, **updated 16 June 2026** (supersedes the older ₹1,000 / three-withdrawal version)
- CBDT / incometaxindia.gov.in: **s.124(4), s.124(8), s.124(9), Income-tax Act 2025**; **Schedule II Table S.No. 6**; **Schedule III Table S.No. 4**; s.80CCD(1B)/(3) of the 1961 Act; "Tax free incomes"
- Finance Act, 2025, and Memorandum to Finance Bill, 2025, heading D(II) ¶4
- Finance (No. 2) Act, 2024 (60% exemption, w.e.f. 1 April 2025)

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*This article is educational content, not personalised investment or tax advice. NPS Vatsalya rules change — the position above is stated as at the date shown at the top. Verify the current rules with PFRDA, and your own tax position with a chartered accountant, before you act.*