Major changes to NPS from October 1: Opportunity to invest 100% of money in shares for big earnings, withdrawal rules will be easier..

If you invest in the National Pension System (NPS) for retirement planning, this news is very important for you. Initially, the NPS was launched exclusively for government employees, but in October 2009, the government opened it to private sector subscribers (non-government subscribers) and ordinary citizens. Over the past 16 years, the scheme has become very popular and a reliable retirement investment. The government has periodically amended its rules to make them more accessible, tax-friendly, and more suited to individual needs.

New Changes for NPS Subscribers Starting October 1
Over the past several years, the scheme has seen several major changes and improvements, such as equity exposure rules, taxation, and withdrawal guidelines. Now, starting October 1, 2025, some significant changes are set to be implemented again. The most significant changes include allowing non-government subscribers to invest 100% in equity, the new Multiple Scheme Framework (MSF), and withdrawals. Let's explore the new changes and benefits for NPS subscribers from October 1st...

100% Equity Investment Option
Until now, the equity investment limit in NPS was 9% (75%). However, this limit will be increased to 100% from October 1st, 2025. From October 1st, 2025, non-government subscribers will be allowed to invest their entire corpus in equity options. This means investors can now invest their entire funds in equities if they wish.

It's worth noting that equity investments have consistently delivered superior returns over the long term. This will benefit those seeking higher returns over the long term and willing to take risks in the stock market. This will provide investors with the opportunity to build a substantial corpus by retirement. However, the equity market is highly volatile, so there will be risks involved.

Multiple Scheme Framework (MSF)
Until now, NPS subscribers could only run one scheme under a single PRAN (Permanent Retirement Account Number). However, under the new rules, a Multiple Scheme Framework is being introduced. This means that you will now be able to choose schemes from different Central Record Keeping Agencies (CRAs) under a single PRAN. This will provide investors with greater choice and flexibility.

Under this, pension fund managers will now be able to introduce new customized schemes based on investors' profiles, age, gender, or profession. This will benefit investors by allowing them to choose from low, medium, and high-risk options based on their convenience and risk tolerance. The existing NPS scheme will now be called the "Common Scheme," while the new schemes under the MSF will be separate.

Exit and withdrawal rules will also be simplified.

PFRDA has proposed simplifying withdrawal and exit rules to make NPS more attractive.

Exit opportunity after 15 years: Previously, the option to exit NPS was mostly available after retirement (60 years) or after a longer period. However, it is now proposed that non-government subscribers will be able to exit the scheme even after completing 15 years. For example, if someone starts investing at the age of 30, they can exit at 45 if they wish. This will provide relief if they need money in the interim.

Easy lump sum withdrawal and partial withdrawal: The pension fund regulator has also recommended increasing the lump sum withdrawal limit and simplifying the rules for partial withdrawals. Currently, the rule mandates that 40% of the corpus be invested in an annuity at the time of withdrawal. It is proposed to reduce this limit to 20%, meaning investors will now be able to withdraw up to 80% of their corpus in cash.

This means that the relaxation in annuity rules will make it easier to withdraw funds for needs such as education, medical expenses, or building a house. However, according to tax rules, up to 60% of the amount withdrawn will still be tax-free, while the remaining 20% ​​may be taxable.

Lump Sum Withdrawal Limit Increased
If you have up to ₹12 lakh in your NPS corpus at age 60, you can withdraw 50% or ₹6 lakh (whichever is higher) as a tax-free lump sum. You can withdraw the remaining amount in installments, convert it into a pension (annuity), or choose a combination of both.

Rules will also be simplified for those with a smaller corpus. For example, if your corpus is up to ₹4 lakh, you can withdraw the entire amount in one lump sum. Previously, this limit was ₹2.5 lakh.

Partial Withdrawal
Previously, you could withdraw money only three times during the entire investment period. Now, this limit will be increased to six, provided there is a 4-year gap between each withdrawal. After the age of 60, withdrawals can be made three times per financial year.

Major Changes in the Last Year
The NPS has also undergone several changes in the last year. The most significant change is the Unified Pension Scheme (UPS), which has been introduced only for central government employees, excluding the armed forces. This change was made amid continued demands for the OPS (Old Pension Scheme). However, UPS has not yet seen much interest from employees. Therefore, the government has also provided an option to return to NPS once. Whose deadline is ending today i.e. 30th September.

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