By IndiaHub 
A key change for the non-government NPS subscribers was that they are now able to withdraw up to 80% of their corpus under various conditions. In certain situations, they can even take out 100% of their corpus in lump sum. Previously, the maximum lump sum withdrawal limit for non-government NPS subscribers at the age of 60 or upon superannuation was capped at 60% if their corpus exceeded Rs 5 lakh.
With this update, the minimum annuity purchase limit at 60 years has also been lowered to at least 20% of the retirement corpus from the earlier limit of at least 40%.
Kurian Jose, CEO, Tata Pension Management, says that the 80% lump sum withdrawal rule provides greater flexibility to those non-government subscribers who prefer managing their own investments rather than being locked into fixed annuity rates.
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Anita Basrur, Partner, Sudit K. Parekh & Co. LLP, notes that the revised rules for non-government subscribers improve liquidity, provide better flexibility at retirement, and could benefit those looking for upfront capital on retirement (like for purchasing or renovating a home). However, Basrur warns that a lower annuity might result in decreased guaranteed income.
While the 80% lumpsum withdrawal rule has indeed given more flexibility to NPS subscribers, there are specific conditions they ought to be aware of. Here are the 5 conditions under which non-government subscribers can take advantage of the 80% lump sum withdrawal rule:
While the 80% lump sum withdrawal rule may provide greater flexibility to non-government NPS subscribers, they can opt for this option only under the following five conditions:
Exit by individuals who joined before the age of 60 years
If a non-government NPS subscriber has been part of the pension scheme for 15 years or longer, has reached 60 years of age, has superannuated or is physically incapacitated, they can withdraw up to 80% in lump sum on 3 conditions:
Condition 1: When NPS retirement corpus is up to Rs 8 lakh
If the non-government NPS subscriber has up to Rs 8 lakh in their retirement corpus (accumulation pension wealth (APW) at the time of exit), they can withdraw up to 80% of their corpus. In this case, they must buy annuity for at least 20% of the amount.
However, with the same corpus, they also have the option to withdraw up to 100% of the corpus as a lump sum.
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Condition 2: When NPS retirement corpus is more than Rs 8 lakh up to Rs 12 lakh
If a non-government subscriber opts for this option, they can withdraw up to 80% of their corpus as lump sum. They have to purchase annuity from at least 20% of the remaining amount.
In the same corpus range, the non-government subscriber also two additional options-
They can withdraw up to Rs 6 lakh as a lump sum, and from the remaining amount, they have to start systematic unit redemption (SUR) for at least six years. SUR is a process where, instead of withdrawing a fixed amount, a subscriber can redeem units from their NPS investment.
In another option, they can withdraw up to Rs 6 lakh as a lump sum from their corpus, and they need to purchase annuity from the remaining amount.
Condition 3: When NPS retirement corpus is more than Rs 12 lakh
If they have a corpus of more than Rs 12 lakh, a non-government subscriber can withdraw up to 80% of their corpus as lump sum. They need to purchase annuity from at least 20% of the corpus.
Exit by individuals who joined on or after 60 years of age
The option to withdraw up to 80% of the corpus in the form of a lump sum is also available to those non-government subscribers who had joined NPS on or after 60 years of age. They can avail the option if-
Condition 4: Corpus is up to Rs 12 lakh
If their corpus is up to Rs 12 lakh, they can withdraw up to 80% of it as a lump sum. They have to purchase annuity from at least 20% of the corpus.
However, with the same corpus, they also have the option to withdraw up to 100% of their corpus as a lump sum, and in that condition, they don’t need to buy annuity or withdraw through SUR.
Condition 5: When corpus is more than Rs 12 lakh
The only option under this condition for a non-government subscriber is that they can withdraw up to 80% of the corpus as a lump sum, and must buy annuity from at least 20% of the corpus.
80% lump sum withdrawal tax treatment
Earlier, if somebody withdrew 60% of their corpus as lump sum at 60 years of age, such a withdrawal was tax-free.
With the withdrawal limit now increased up to 80%, Jose highlighted that subscribers need clarity on the tax treatment of the increased lump sum withdrawal.
Basrur also said that clarification on the taxability of an enhanced withdrawal of 80% is still awaited.
However, when ET Wealth spoke to chartered accountants (CAs), asking about tax liability in revised NPS lump sum withdrawal rules, they said that till the government notifies a new rule, only 60% of the corpus will be tax-free at retirement, and the subscriber needs to pay tax on the remaining 20% withdrawal amount.