Save Rs 499. Go Ad-Free with CAclubindia Pro for 2 Full Years. Subscribe Now!

NPS Pre Maturity full exit taxation rules

742 views 3 replies

Deepak K

Mutual Fund Distributor INSURANCE ADVISO

55 Points Posted on 12 February 2026

Dear Sir/Madam,

I want to know the taxation rules for NPS full exit without any annuity option for the corpus below 5 lakh.

As per the NPS rules after 5 years & corpus below 5 lakh full lumpsum exit is allowed without opting for any annuity.

What will be taxation in that case?

Please guide

Replies (3)

Quick Summary

For NPS full exit with corpus up to Rs 5 lakh, entire withdrawal is tax exempt as per CBDT Circular 7 2018 and Section 10 12A. No annuity is required and 100 percent amount can be withdrawn tax free.

Aashok Kumar Sharma

Finance/Compliance Consultant

62605 Points Posted on 12 February 2026

If NPS corpus is below ₹5 lakh and full withdrawal is made before age 60:

60% of corpus is tax exempt
40% of corpus is taxable as per slab

Even though annuity is not mandatory, tax exemption remains limited to 60%.

Sandhya Garg

Finance Consultancy Services

179 Points Posted on 13 February 2026

As clarified by CBDT Circular No. 7/2018 dated 20.12.2018, where full withdrawal of accumulated corpus under NPS is permitted as per PFRDA regulations (small corpus cases), the entire amount so withdrawn shall be exempt under Section 10(12A) of the Income Tax Act, 1961.