Borrow Against Your NPS Without Exiting: PFRDA 2025 Rule Permitting a Lien on Your Pension Corpus

For more than a decade, a National Pension System account was one of the few financial assets an Indian saver could not borrow against. The PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025, dated 16 December 2025 and announced in a PFRDA press release on 19 December 2025, changed that. Item 23 of the amendment now lets a subscriber take a loan from a regulated financial institution and allows that lender to mark a lien on the individual pension account, capped at 25% of the subscriber's own contribution.

This guide sets out what the rule actually says, how it sits next to the existing partial-withdrawal route, what the Income-tax Act does and does not say about it, and a worked 15-year example that compares borrowing against the corpus with withdrawing from it. Every figure below is taken from the PFRDA amendment or from Oquilia's rate configuration, last checked against PFRDA's before-and-after table of 19 December 2025. Where a rule has not yet been spelt out, we say so rather than guess.

The Scheme Explained

What changed in item 23

Before the 2025 amendment, the position under the 2015 exit regulations was blunt: any assignment or pledge of NPS benefits was void, except where the NPS Trust permitted it. In practice, that meant a subscriber with Rs 30 lakh in the account could not offer a single rupee of it as collateral for a loan.

Item 23 of the 2025 amendment reverses that default, within three limits stated in the regulation itself:

1. Who can lend: only a regulated financial institution. The regulation does not open the door to informal or unregulated lenders.
2. How much can be encumbered: the lien or charge is capped at 25% of the subscriber's own contribution. Employer contributions and accumulated returns do not count towards the base.
3. How it will run: the facility is to be governed by guidelines issued by the Authority for the purpose. As of this article's publication on 18 October 2026, readers should check pfrda.org.in for whether those operating guidelines have been issued, and for the documents a lender will ask for.

In effect, the 25% lien ceiling sits within the partial-withdrawal limit, which is also 25% of own contributions. The practical result is that a subscriber can use part of the corpus as security without exiting NPS and without reducing the invested balance on day one.

Item 22 of the same amendment is a separate change: it introduces a provision enabling exit and withdrawal rules for specific purpose schemes under NPS. It does not affect the lien rule, but it signals that PFRDA intends to keep adding product-specific rules under the same regulations.

The rules the lien sits next to

A lien does not exist in isolation. The same December 2025 amendment rewrote most of the NPS exit framework, and the figures below, from PFRDA's before-and-after table, define the limits a borrower is working within.

The government sector keeps a different split. For central and state government subscribers, PFRDA's table retains a maximum 60% lump sum and a minimum 40% annuity at normal exit, with the same Rs 8 lakh and Rs 12 lakh corpus thresholds. NPS-Lite also stays at a 60% lump sum and 40% annuity, with full lump sum allowed up to Rs 2 lakh. Our earlier explainer on the 2025 exit and withdrawal amendment walks through each of those changes item by item.

Other retirement balances for comparison

The lien cap of 25% of own contribution is narrower than it first sounds, because the base excludes employer money and returns. Unlike a partial withdrawal, the borrowed amount must be repaid to the lender, but the NPS balance stays invested throughout. The PPF rate of 7.1% applies for October to December 2026 and is next reviewed on 1 January 2027; the EPF rate of 8.25% was declared by EPFO for FY 2025-26. You can model each of these balances with the PPF calculator and the NPS calculator.

Tax on Withdrawal

A loan is not a withdrawal

The amendment changes PFRDA's regulations. It does not amend any section of the Income-tax Act, 1961, and PFRDA has no power to do so. While a lien is marked and the loan is serviced normally, no amount is paid out of the pension account, so neither Section 10(12A) nor Section 10(12B) is triggered by the act of borrowing. What happens for tax purposes if a lender ever enforces its charge against the pension account is not addressed in the amendment, and we have found no CBDT circular on it. Anyone relying on the lien should ask the lender, in writing, how enforcement would be processed and treat that slice as unconfirmed until the guidelines and any tax clarification appear.

Partial withdrawals: Section 10(12B)

If you withdraw instead of borrowing, Section 10(12B) exempts a partial withdrawal to the extent it does not exceed 25% of your own contributions. That exemption ceiling still matches PFRDA's 25% withdrawal ceiling, so a withdrawal within the regulatory limit stays within the exemption. The full text of Section 10 is on indiacode.nic.in and the e-filing guidance is on incometax.gov.in.

Normal exit: the 80% and 60% ceilings are different

This is the single most important tax point for NPS subscribers today. Since 19 December 2025, a non-government subscriber may take up to 80% of the corpus as a lump sum, but Section 10(12A) exempts the payment on closure only to the extent it does not exceed 60% of the total amount payable. That 60% ceiling has applied since 1 April 2020 and has not been changed by any Finance Act we have found.

So on exit there are three slices:

1. Up to 60% of the corpus: exempt under Section 10(12A).
2. Between 60% and 80%: permitted by PFRDA, but the Income-tax Act does not state that it is exempt. Do not assume it is tax-free, and do not assume it is taxable either; confirm the treatment with a chartered accountant or the Income Tax Department before you withdraw it.
3. The annuity portion (minimum 20%): the purchase itself is not a cash receipt, but the pension the annuity pays each year is taxed as income at your slab rate.

Which regime matters

Annuity income is added to your total income. Under the new regime for FY 2025-26, income up to Rs 4 lakh is taxed at 0%, Rs 4 lakh to Rs 8 lakh at 5%, Rs 8 lakh to Rs 12 lakh at 10%, and the Section 87A rebate of up to Rs 60,000 removes tax for total income up to Rs 12 lakh. The standard deduction is Rs 75,000 in the new regime and Rs 50,000 in the old regime. On the contribution side, the extra Rs 50,000 deduction under Section 80CCD(1B) is available only under the old regime; it is not available in the new tax regime. Health and education cess of 4% applies on top of tax in both regimes.

Worked Drawdown

The subscriber

The example below is illustrative. It uses one assumed figure, an 8% annual return on the NPS corpus, which is an assumption for arithmetic only and not a forecast; actual NPS returns are market-linked and will differ. Every rule applied comes from the amendment.

• Age 45, non-government (All Citizen Model) subscriber.
• Corpus: Rs 30 lakh, of which the subscriber's own contributions total Rs 12 lakh.
• Needs Rs 3 lakh today.
• To isolate the effect of the decision, no further contributions are assumed.

Maximum lien: 25% of Rs 12 lakh = Rs 3 lakh. Maximum partial withdrawal: also 25% of Rs 12 lakh = Rs 3 lakh, provided the subscriber has completed 3 years in NPS.

Borrow or withdraw: the 15-year effect

The growth factor used is 1.08 raised to the power 15, which equals 3.1722. Rs 30 lakh multiplied by 3.1722 gives Rs 95.17 lakh; Rs 27 lakh gives Rs 85.65 lakh. The Rs 9.52 lakh gap is what the withdrawn Rs 3 lakh would have become inside NPS.

That gap is not free money. Under path A, the subscriber repays the Rs 3 lakh principal plus whatever interest the lender charges. The test is simple: borrowing beats withdrawing only if the total interest you pay over the loan's tenure is less than the growth the Rs 3 lakh would have earned in NPS over the same period. On the 8% assumption, a loan priced at about 8% a year or more roughly cancels the advantage. The regulation itself sets no interest rate for lien-backed loans, so compare the actual sanction letter against your own fund's return before deciding.

At 60: exit arithmetic under the 2025 rules

A government-sector subscriber with the same Rs 95.17 lakh would be limited to a 60% lump sum of Rs 57.10 lakh and a minimum annuity of Rs 38.07 lakh, because the 60% lump sum and 40% annuity split still applies to that sector.

Years 1 to 6 of retirement: drawing down the exempt slice

Suppose path A's subscriber takes only the Rs 57.10 lakh exempt slice as a lump sum, keeps the rest in the annuity and the account, and draws Rs 4.5 lakh at the start of each year from the lump sum. The remaining balance is assumed, again for arithmetic only, to earn 7% a year.

After 6 years the subscriber has drawn Rs 27 lakh and still holds Rs 51.25 lakh, because a 7.9% withdrawal rate on the opening Rs 57.10 lakh is only slightly above the assumed 7% return. Part of that lump sum could sit in the Senior Citizens' Savings Scheme, which pays 8.2% for October to December 2026, reviewed again on 1 January 2027: Rs 25 lakh at 8.2% produces Rs 2.05 lakh a year, or Rs 51,250 a quarter. You can test your own mix with the SCSS calculator and compare an annuity against a systematic withdrawal plan with the annuity vs SWP calculator.

Where the lien helps most

The lien is most useful in a narrow window: a subscriber who is at least a decade from 60, has a temporary need no larger than 25% of their own contributions, and can service a loan from salary. For someone at 58, the 2-year compounding gap between paths A and B is small, and a partial withdrawal, which needs no repayment, is usually the simpler route. If you are weighing how much corpus you need overall, the FIRE calculator works backwards from a target annual spend.

FAQ

Can I take a loan against my NPS account now?

The 2025 amendment, dated 16 December 2025, permits a lien of up to 25% of your own contribution in favour of a regulated financial institution. It is to be governed by guidelines issued by PFRDA, so check pfrda.org.in for whether the operating guidelines are in force and which lenders offer the facility.

Does the 25% limit include my employer's contributions?

No. Item 23 limits the lien to 25% of the subscriber's own contribution. On a Rs 30 lakh corpus with Rs 12 lakh of own contributions, the cap is Rs 3 lakh, not Rs 7.5 lakh.

Do I have to exit NPS to borrow against it?

No. Removing the need to exit is the point of item 23. The account stays open and invested, and the lender holds a charge on up to 25% of your own contribution until the loan is repaid.

Is a loan against NPS taxed like a withdrawal?

A loan is not a payment out of the account, so Sections 10(12A) and 10(12B) are not triggered by borrowing. The amendment does not say how an enforced lien would be treated for tax, and we found no CBDT clarification as of 18 October 2026, so confirm that before signing.

Is the full 80% lump sum at 60 tax-free?

Not on the current text of the Income-tax Act. PFRDA allows a non-government subscriber to take up to 80% as a lump sum, but Section 10(12A) exempts only 60% of the total amount payable. Confirm the treatment of the 60% to 80% slice before withdrawing it.

How many partial withdrawals can I make instead?

Up to 4 before age 60, with a gap of 4 years between them, after at least 3 years in NPS. After 60 there is no cap on the number, but a 3-year gap applies. Each is limited to 25% of your own contributions and is exempt under Section 10(12B) within that limit.

Can I claim Section 80CCD(1B) on contributions I make to rebuild the corpus?

Only under the old regime. The additional Rs 50,000 deduction under Section 80CCD(1B) is not available in the new tax regime.

This article explains published regulations and is not personalised financial or tax advice. Figures for the 8% and 7% returns are assumptions for illustration only. Source: PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025.