NPS New Rules 2026: How the Latest Changes Affect Your Retirement Planning
PFRDA's December 2025 amendments give NPS subscribers significantly more flexibility over their retirement corpus. Here's what changed and what you should do next.
What Changed: Before vs. After
Stay in NPS Until Age 85
Previously, NPS subscribers had to exit the system by age 75. Under the amended regulations, the maximum age to remain invested in NPS has been extended to 85 years. This applies to both government and non-government subscribers — a significant development for retirees who want to keep their corpus growing with market-linked returns.
Revised Lump Sum Withdrawal Limits
The rules around how much you can withdraw as a lump sum upon retirement have been updated based on corpus size:
| NPS Corpus | Lump Sum Allowed |
|---|---|
| Up to ₹8 lakh | 100% withdrawal |
| ₹8 lakh – ₹12 lakh | Up to ₹6 lakh |
| Above ₹12 lakh | 80% (non-govt) / 60% (govt) |
Compulsory Annuity Reduced to 20%
Earlier, NPS subscribers were required to use at least 40% of their corpus to purchase an annuity. That requirement has now been reduced to just 20% for non-government subscribers. This unlocks significantly more flexibility in how you deploy your retirement savings.
New Flexibility Features
Loans Against NPS
Subscribers can now take a loan against their NPS corpus and make partial withdrawals to settle such loans — a first for the NPS framework.
Partial Withdrawals After 60
Subscribers staying beyond 60 can make partial withdrawals every 3 years, up to 25% of their own contributions.
NRI Exit Clarity
Subscribers who renounce Indian citizenship can close their account and withdraw the entire corpus as a lump sum.
Corporate NPS Parity
Private-sector employees now get the same 14% employer contribution deduction as govt. employees under the new tax regime.
Scheme A Merged with Schemes C and E
PFRDA has merged Scheme A (Alternative Investment Fund) with Schemes C (Corporate Bonds) and E (Equity). This consolidation gives NPS portfolios access to larger, more diversified investment pools.
What You Should Do Now
- Review your asset allocation. With the Scheme A merger, check if your current fund choices still align with your risk appetite and retirement timeline.
- Recalculate your retirement needs. The reduced annuity requirement means more money stays in your hands — plan how to generate regular income from the lump sum portion.
- Talk to your employer about Corporate NPS. The 14% employer contribution deduction makes it extremely valuable under the new tax regime.
- Understand the tax gap. PFRDA allows 80% withdrawal but only 60% is tax-free under current income tax laws. Plan accordingly.