Loan against your NPS account: how the December 2025 lien-and-charge rule under Exit Regulation 6(b) and 8(1)(A)(h) works

Until 16 December 2025, a National Pension System (NPS) account was close to useless as collateral. Regulation 6 of the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 treated any assignment or pledge of NPS benefits as void unless NPS Trust permitted it, and pension wealth could not be seized, attached or sequestered by court process at a creditor's instance. The amendment notified by the Pension Fund Regulatory and Development Authority (PFRDA), effective 16 December 2025 and summarised in its press release of 19 December 2025, changes that for the first time by inserting a new Regulation 6(b) and a new withdrawal purpose in Regulation 8(1)(A)(h).

This explainer sets out what the two provisions say, what PFRDA has and has not yet specified, how tax applies when NPS money is used to settle a loan, and a worked multi-year example showing how a lien interacts with the 25% partial withdrawal cap and the exit at 60. The primary source is the consolidated text of the PFRDA Exit Regulations, last amended 16 December 2025+Regulations,+2015+%5BLast+amended+on+16+December+2025%5D.pdf). If you are new to the scheme, the NPS glossary entry covers the basics.

The Scheme Explained

What Regulation 6 said before, and what it says now

Regulation 6(a) is unchanged in its core protection: pension wealth in an NPS account is still not liable to seizure, attachment or sequestration by any court process at the instance of a creditor, except where NPS Trust has sanctioned an assignment within the limits of Regulation 8. What the December 2025 amendment adds is Regulation 6(b), which works in the subscriber's favour rather than the creditor's. Under 6(b), the subscriber has a right to seek financial assistance from a regulated financial institution to the extent permitted under Regulation 8, and may make an assignment, pledge, contract, order, sale or security of any kind over NPS benefits in favour of that lender.

The lender, in turn, may mark a lien or charge on the individual pension account to the extent permitted under Regulation 8. NPS Trust is to permit the facility in line with guidelines or a circular issued by PFRDA. In plain terms, the account becomes pledgeable, but only up to a ceiling tied to the partial withdrawal rules and only to a regulated lender, which keeps it a secured loan with a narrow, defined collateral pool.

The 25% ceiling and where it comes from

PFRDA's press release of 19 December 2025 states that the lien is capped at 25% of the subscriber's own contribution, in other words within the existing partial withdrawal limit, and that the facility will be governed by guidelines issued by the Authority. That ceiling mirrors Regulation 8(1), which caps any partial withdrawal at 25% of the contributions made by the subscriber. Employer contributions and returns are excluded from the base, so the pledgeable amount can be far smaller than the account balance.

Regulation 8(1)(B)(a) adds a time condition: the subscriber must have been in NPS for a minimum of 3 years before a partial withdrawal is allowed. Because the lien is tied to the same Regulation 8 limits, a subscriber with less than 3 years in the scheme should not expect to pledge the account either, although the operational detail awaits PFRDA's separate guidelines.

The new withdrawal purpose: Regulation 8(1)(A)(h)

The second half of the change is a new partial withdrawal purpose, clause (h) of Regulation 8(1)(A): settlement of a financial obligation availed from a regulated financial institution against the lien or charge on the account. This is the mechanism by which the loan is actually repaid from NPS, if the borrower chooses or needs to. The same amendment of 16 December 2025 also replaced the earlier specified-illness list with a broader purpose covering medical treatment or hospitalisation of the subscriber, spouse, children or parents.

How often you can withdraw

The frequency rules in Regulation 8(1)(C) were also rewritten on 16 December 2025, and they matter because a withdrawal to settle a loan uses up one of the permitted slots. The figures below are taken from src/data/rate-config.ts, which records the PFRDA amendment.

What PFRDA has not yet published

Three points remain open as of this writing. First, the operational guidelines on the lien facility are to be issued separately by PFRDA; the regulation text and the press release of 19 December 2025 do not name participating lenders, interest rates, loan-to-value ratios or a process. Second, it is not stated in the regulation text whether an outstanding lien reduces the amount available for an unrelated partial withdrawal, such as a medical purpose, in the meantime. Third, the regulations do not specify what happens to a lien at the point of exit at 60 if the loan is still outstanding. Check PFRDA and your Central Recordkeeping Agency (CRA) for the guidelines before signing any loan agreement.

Tax on Withdrawal

Partial withdrawal used to settle the loan

The Income-tax Act, 1961 governs tax, not the PFRDA regulations, and the two must be read separately. Section 10(12B) exempts a partial withdrawal from NPS to the extent it does not exceed 25% of the contributions made by the subscriber. Because the PFRDA partial withdrawal cap and the lien ceiling are both 25% of own contributions, a withdrawal under the new Regulation 8(1)(A)(h) that stays within that limit falls within the 10(12B) exemption on its face. The text of Section 10 is available on India Code and on the Income Tax Department portal. Section 10(12B) is framed around the amount, not the purpose; Oquilia has found no CBDT notification either excluding or confirming loan settlement, so treat this as the plain reading of the statute.

Lump sum at exit

At normal exit, the PFRDA rules now allow a non-government subscriber (All Citizen Model and Corporate Sector) to take up to 80% of the corpus as a lump sum and put at least 20% into an annuity. For the government sector the split remains 60/40, and NPS-Lite also stays at 60/40. A non-government corpus of Rs 8 lakh or less may be taken entirely as a lump sum.

The tax exemption has not moved with the withdrawal limit. Section 10(12A) still exempts the payment on closure or opting out only to the extent it does not exceed 60% of the total amount payable, the figure in force since 1 April 2020. So a non-government subscriber who withdraws the full 80% has a 20 percentage-point slice whose treatment does not follow from 10(12A). Oquilia has found no Finance Act amendment aligning the two, and we do not assert that this slice is either taxable or exempt; confirm it before you exit.

Annuity income

Pension received from the annuity is taxed as income at your slab rate in the year it is received; there is no exemption for it in Section 10.

Worked Drawdown

The example below is illustrative arithmetic, not a forecast, and it deliberately uses no assumed loan interest rate because PFRDA has not published one and none is regulated. It shows only how the 25% ceiling, the frequency rules and the exit split interact.

The subscriber

Consider a non-government subscriber who joined NPS at 40 and is now 48, with 8 years in the scheme. The subscriber's own contributions total Rs 12,00,000, the employer has contributed Rs 6,00,000, and returns have taken the corpus to Rs 30,00,000. You can model your own figures with the NPS calculator.

Step 1: the pledgeable amount at 48

Under the press release ceiling, the lien can be at most 25% of own contributions: 25% x Rs 12,00,000 = Rs 3,00,000. That is 10% of the Rs 30,00,000 corpus. The employer's Rs 6,00,000 and the Rs 12,00,000 of returns are not in the base. If a regulated lender sanctions a loan, the lien on the account cannot exceed Rs 3,00,000.

Step 2: settling the loan from NPS at 52

Suppose that at 52 the subscriber uses Regulation 8(1)(A)(h) to clear an outstanding balance of Rs 3,00,000 from the account. Assume own contributions have reached Rs 15,00,000 by then and the corpus Rs 40,00,000. The cap at 52 is 25% x Rs 15,00,000 = Rs 3,75,000, so a Rs 3,00,000 withdrawal is within it and, read plainly, within Section 10(12B). This counts as the first of the 4 permitted withdrawals before 60, and the next cannot come before 56, given the 4-year minimum gap.

Step 3: one more withdrawal before 60

At 56, assume own contributions of Rs 18,00,000. A medical withdrawal is capped at 25% x Rs 18,00,000 = Rs 4,50,000. After this, the subscriber has used 2 of 4 slots, and the 4-year gap means no further withdrawal is possible before 60, so the remaining 2 slots lapse in practice if the subscriber exits at 60.

Step 4: exit at 60

Assume a corpus of Rs 50,00,000 at 60, after the two withdrawals. The non-government split allows up to 80% as a lump sum.

The comparison that matters is between the Rs 3,00,000 the subscriber used to settle the loan and what that money would have grown to inside NPS for 8 more years. The pledge does not cost anything until it is enforced; the withdrawal does, because it removes compounding money from the corpus. To compare a lump-sum-plus-annuity exit with a systematic drawdown, the annuity vs SWP calculator and the retirement drawdown calculator let you test different corpus figures.

Step 5: after 60

If the subscriber defers exit, Regulation 8(1)(C) allows further partial withdrawals after 60 at minimum 3-year intervals with no cap on the number, so withdrawals at 60, 63 and 66 would be permissible on the frequency rule alone. Exit itself can be deferred up to 85.

FAQ

Can I take a loan against my NPS account now?

The legal permission exists from 16 December 2025 under Regulation 6(b) of the PFRDA Exit Regulations, but NPS Trust is to permit the facility in line with guidelines or a circular from PFRDA. Until those guidelines are issued and lenders implement them, confirm availability with your CRA and lender.

How much of my NPS account can be pledged?

PFRDA's press release of 19 December 2025 caps the lien at 25% of your own contribution, matching the partial withdrawal limit in Regulation 8(1). Employer contributions and returns are not counted. On own contributions of Rs 10,00,000, the ceiling is Rs 2,50,000.

Which lenders can mark a lien?

Regulation 6(b) refers only to a regulated financial institution. Neither the regulation text nor the 19 December 2025 press release names specific lenders, and Oquilia will not list any until PFRDA's guidelines do.

Can a creditor attach my NPS money through a court?

No, in general. Regulation 6(a) still bars seizure, attachment or sequestration of pension wealth by court process at a creditor's instance, with the single exception of an assignment sanctioned by NPS Trust within Regulation 8 limits. The lien under 6(b) is a voluntary pledge to a regulated lender, not a creditor's attachment.

Is a partial withdrawal to repay the loan tax-free?

Section 10(12B) exempts NPS partial withdrawals up to 25% of the subscriber's own contributions, and it is framed by amount rather than purpose. A withdrawal under Regulation 8(1)(A)(h) within that 25% limit falls within the exemption on a plain reading; confirm with a tax adviser if the amount is large.

Does using NPS to settle a loan use up a withdrawal slot?

Yes. Regulation 8(1)(A)(h) is a partial withdrawal purpose, so it counts towards the 4 withdrawals allowed before 60 or superannuation, whichever is later, and triggers the 4-year minimum gap before the next one.

Does the lien change the tax-free limit at exit?

No. Section 10(12A) still exempts only 60% of the total amount payable at closure, even though PFRDA now allows a non-government subscriber to take up to 80% as a lump sum. The lien facility under Regulation 6(b) does not alter either figure.

This article is general information based on the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 as amended on 16 December 2025 and the Income-tax Act, 1961. It is not financial, tax or legal advice. Check the PFRDA website for the operational guidelines on the lien facility before acting.