Direct answer
Since PFRDA's December 2025 amendments, non-government NPS subscribers can take up to 80% of the corpus as a lumpsum at normal exit and must annuitise at least 20% (earlier 60:40). If the corpus is ₹8 lakh or less, all of it can be withdrawn. Government-sector subscribers stay at 60:40.
The catch: halving the annuity roughly halves the guaranteed pension. And as of 7 October 2026, only 60% of the corpus is tax-exempt on withdrawal. The extra 20% is expected to be taxed at your slab rate.
Since December, almost every NPS conversation I have starts the same way: “So I can take 80% now, right?” Yes, you can. Whether you should is a different question, and the answer usually turns on two things nobody mentions in the headlines: tax on that extra 20%, and what pays your bills at 78.
What changed: before vs after
| Rule (non-government subscribers) | Before | After (Dec 2025) |
|---|---|---|
| Max lumpsum at normal exit | 60% | 80% |
| Minimum annuity at normal exit | 40% | 20% |
| Full withdrawal allowed if corpus is | ≤ ₹5 lakh | ≤ ₹8 lakh |
| Corpus ₹8–12 lakh | 60:40 applied | Up to ₹6 lakh lumpsum; rest via systematic unit redemption or annuity |
| Premature exit: full withdrawal if corpus is | ≤ ₹2.5 lakh | ≤ ₹5 lakh (otherwise ≥80% annuity) |
| Government-sector subscribers | 60:40 | 60:40 (unchanged) |
Sources: PIB release, 19 Dec 2025; PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 — as amended 16 Dec 2025. Check the regulation text and your CRA for special cases (death, disability, Tier II, UPS).
How big will the corpus be? (illustration)
Monthly contributions for 25 years at assumed annual returns (NPS returns are market-linked and not guaranteed):
| Monthly contribution | At 8% | At 10% | At 12% | You invest |
|---|---|---|---|---|
| ₹5,000 | ₹47.87 lakh | ₹66.89 lakh | ₹94.88 lakh | ₹15.00 lakh |
| ₹10,000 | ₹95.74 lakh | ₹1.34 crore | ₹1.90 crore | ₹30.00 lakh |
| ₹20,000 | ₹1.91 crore | ₹2.68 crore | ₹3.80 crore | ₹60.00 lakh |
80:20 vs 60:40 on the same corpus
Illustration: ₹10,000 a month for 25 years at an assumed 10% ≈ ₹1.34 crore. Annuity at an illustrative 6.5% a year (not a quote):
| 60:40 (old / government) | 80:20 (new, non-government) | |
|---|---|---|
| Lumpsum | ₹80.27 lakh | ₹1.07 crore |
| Annuity purchase | ₹53.52 lakh | ₹26.76 lakh |
| Monthly pension (pre-tax) | ₹28,988 | ₹14,494 |
| Tax-exempt lumpsum (60% of corpus) | ₹80.27 lakh | ₹80.27 lakh |
| Lumpsum taxable at slab (current law) | ₹0 | ₹26.76 lakh |
Pension sensitivity to the annuity rate (₹1 crore corpus)
| Annuity rate (illustrative) | 20% annuitised (₹20 lakh) | 40% annuitised (₹40 lakh) |
|---|---|---|
| 5.5% | ₹9,167 | ₹18,333 |
| 6% | ₹10,000 | ₹20,000 |
| 6.5% | ₹10,833 | ₹21,667 |
| 7% | ₹11,667 | ₹23,333 |
Actual rates depend on the Annuity Service Provider, your age, spouse cover and return-of-purchase-price options. Get live quotes from the CRA annuity quote tool before exit.
Tax on the extra 20% lumpsum
The income-tax exemption for NPS closure withdrawals (section 10(12A) of the 1961 Act) covers 60% of the corpus. Budget 2026 did not extend this to 80%, so — unless the law changes — the additional 20% is added to your income in the year you withdraw. On a ₹1 crore corpus (new regime FY 2026-27, surcharge ignored):
| Scenario | Taxable extra lumpsum | Approx. tax incl. 4% cess |
|---|---|---|
| The ₹20 lakh is your only income that year | ₹20,00,000 | ₹2,08,000 |
| Your other income already exceeds ₹24 lakh (30% slab) | ₹20,00,000 | ₹6,24,000 |
You don't have to take the full 80%. Withdrawing 60% keeps the lumpsum within the exemption, and you can also defer withdrawal. Run your numbers in the tax regime calculator.
Extra lumpsum + SWP vs a bigger annuity (illustration)
Suppose you take the extra ₹20 lakh instead of annuitising it, and invest it to withdraw the same ₹10,833/month the annuity would have paid at 6.5%:
| Amount invested | Assumed return | Lasts for |
|---|---|---|
| ₹20,00,000 | 6% a year | 42.9 years |
| ₹20,00,000 | 8% a year | 50+ years (not depleted) |
| ₹13,76,000 (after 31.2% tax) | 6% a year | 16.9 years |
| ₹13,76,000 (after 31.2% tax) | 8% a year | 23.6 years |
The annuity pays for life (and its income is also taxable), while the SWP keeps the capital accessible but depends on market returns and how long you live. If the extra lumpsum is taxed at 30%, the SWP runs out much sooner. Model it in the SWP calculator and the NPS calculator.
The mistake I'm already seeing
People pick 80% by default and treat the extra lumpsum as a bonus. Then it goes into a flat, a child's wedding or a “safe” FD that's taxed again. A 60-year-old retiring with a ₹1.00 crore corpus who takes 80% gets about ₹10,833 a month from the annuity at an illustrative 6.5%. That rarely covers groceries, medicines and the electricity bill in a metro.
The 80% option is a ceiling, not a target. You can annuitise more than 20%, and you can withdraw less than 80%.
A practical way to decide
- Add up guaranteed income you already have (EPS pension, rent, family pension) — see the EPF calculator.
- Cover essential monthly expenses with guaranteed income first; annuitise more than 20% if there is a gap.
- Keep 1–2 years of expenses liquid; invest the rest of the lumpsum by goal (emergency fund guide).
- Check the tax on anything above 60% before choosing 80%.