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Nps taxation

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Nabarun KC

Nil

25 Points Posted on 31 July 2026

At retirement 60% of nps corpus could be withdrawn tax free and rest 40% as pension.

Now govt has allowed 80 % withdraw at retirement and 20% pension. But tax free still 60%.

So if I withdraw 80% , I know 60 % is tax free but how the rest 80-60=20% will be taxed for me?

Replies (3)

Quick Summary

The National Pension System (NPS) allows up to 60% of your corpus to be withdrawn tax-free at retirement. Recent changes permit withdrawing up to 80% of the corpus, but the tax-free portion remains capped at 60%. Any amount withdrawn above this 60% threshold, up to the 80% limit, will be taxed according to your income slab in the year of withdrawal. The remaining 20% must be used to purchase an annuity, and the pension received from this annuity will be taxed as income annually.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121546 Points Posted on 31 July 2026

It is taxed at slab rate u/h. IFOS.

Rushabh

Automation Expert

10733 Points Posted on 13 November 2026

The 20% over and above the tax-exempt 60% is taxable in the year of withdrawal. The change allowing withdrawal of up to 80% does not, by itself, increase the tax-exempt limit. The remaining 20% annuity purchase is not taxed at the time of purchase; the pension received from the annuity is taxable as income in the relevant years.

This distinction matters when planning the NPS exit and reporting the lump-sum receipt in the return. Manual retirement-tax working can be difficult; automation can reduce repetitive calculations while leaving the tax treatment and final judgment in your hands. Our platform offers 2,000+ AI agents and 650+ integrations across relevant tax, accounting and compliance workflows. For a walkthrough tailored to your workflow, connect with us on WhatsApp at https://wa.me/message/3HVOZ7HIY4ESC1.

Aashok Kumar Sharma

Finance/Compliance Consultant

77979 Points Posted on 13 November 2026

NPS withdrawals above 60%:

• Sec 10(12A) exempts up to 60% of the NPS corpus withdrawn on closure or retirement. If PFRDA allows a larger lump sum (e.g. 80% under recent changes for some subscribers), the amount beyond 60% is taxable unless the Act is amended to cover it. Annuity income is taxable as Other Sources.

• Check whether the Finance Act has been updated for your year of withdrawal.