India’s public healthcare system is complex and underserved. Most of the time, patients have to shell out money from their pockets during medical emergencies. 

Let’s say you have a family member who is rushed to the hospital which tells you to take a lot of tests and the diagnosis is serious. The doctor hands you an estimate that makes your heart skip a beat. 

You start mentally running through every savings account, every investment, every policy you hold. And then you realize that you have been investing in NPS and you have a corpus built in NPs for quite some years. But you do not know how to use that money for your medical emergency. 

With healthcare costs in India rising you start to ask this important question to yourself: If I am a National Pension System (NPS) subscriber, can I actually touch that money during a crisis or medical emergency, or is it locked away until I’m 60?

In this blog, let’s explore what to do with the money in an NPS account and how to use it for any emergencies. 

Lock-in for your NPS money 

The National Pension System was designed and introduced with one primary purpose which was to make all Indians have a steady income after retirement. By design, it is a long-term, disciplined savings vehicle. 

Your contributions go into a Permanent Retirement Account Number (PRAN) and the money is invested across equity, corporate bonds, and government securities, alternative investment funds (AIFs) depending on your chosen allocation.

Normally, there is a lock-in for your NPS funds and you cannot exit the scheme or access your full corpus before the age of 60. At maturity, you can withdraw up to 60% of your accumulated corpus as a tax-free lump sum and use the remaining 40% of the NPS funds to buy some annuity plan that will give you a regular pension income and financial security.

But here’s the part most people don’t know, i.e., the lock-in is not absolute. NPS allows partial withdrawals under specific circumstances and a medical emergency is one of them. Though the withdrawal rules and procedure are not as flexible as a savings account, withdrawals are allowed and knowing them could make a real difference when you are financially tight. 

Withdrawal rule 

The PFRDA Regulations says that NPS subscribers are allowed to make partial withdrawals from their Tier-1 account for specific eligible reasons, including medical treatment.

The cap is 25% of your own contributions. This number is important because the 25% withdrawal is calculated only on the amount you have personally contributed to your NPS account. It does not include your employer’s contributions (in the case of corporate NPS) or the returns generated on your corpus. 

So if you have contributed Rs 2 lakh personally, you can withdraw up to Rs 50,000 in a single instance. This partial withdrawal is also completely tax-free under Section 10(12B) of the Income Tax Act, which is a meaningful benefit during what is already a financially stressful time.

The key thing to note is that this withdrawal does not close your NPS account. Your remaining corpus continues to stay invested and compound. You are simply accessing a portion of your own money during a time of need which is exactly what the provision is designed for.

Conditions you must meet first

There are conditions set by PFRDA that must be followed and satisfied by you (a NPS subscriber) before you rush to file a withdrawal request. In case, you do not satisfy even one of the conditions, then there is a high chance that your claim may be rejected. 

First, you must have been an NPS subscriber for at least three years from the date of joining. If you opened your NPS account less than three years ago, you are not eligible for partial withdrawal even though there is an emergency.

Second, as far as the standard NPS rules are concerned, you can make a maximum of four partial withdrawals from your Tier-1 account before the age of 60. Each withdrawal cannot exceed 25% of your own contributions at that point in time. A minimum gap of four years is required between two successive withdrawals.

Third, the medical grounds must qualify. The regulations permit withdrawal for medical treatment or hospitalisation of the subscriber, their spouse, children (including legally adopted), or parents. Conditions covered include serious illnesses and treatments that require hospitalisation.

Fourth, you need to submit your withdrawal request through your Point of Presence (POP) or nodal office, along with relevant KYC documents and medical evidence. Then the concerned authorities will process your claim which can take about 10 to 15 working days. So this is not an instant-access facility. If you are seriously ill, a family member can submit the request on your behalf.

NPS Swasthya 

As the healthcare cost in India is rising every year, PFRDA came up with a new scheme that would be a relief to a lot of subscribers. In early 2026, PFRDA had launched the second Proof of Concept (PoC) of NPS Swasthya, a scheme that is intended to merge your retirement savings with real-time healthcare access.

NPS Swasthya or NPS Swasthya Pension Scheme (NPS-SPS) was introduced under PFRDA’s Regulatory Sandbox Framework on a limited, controlled basis. The scheme is open to any Indian citizen on a voluntary basis and operates as a separate scheme under the Multiple Scheme Framework (MSF).

NPS Swasthya is different from regular NPS because it offers the flexibility to withdraw your NPS money for medical expenses. Under NPS Swasthya, subscribers can make partial withdrawals to cover both outpatient (OPD) and inpatient (IPD) medical expenses as and when they arise. There is no restriction on the number of withdrawals and no mandatory waiting period between two withdrawals.

The withdrawal limit is kept at 25% of your own contributions per instance and the first withdrawal can only be made after accumulating a minimum corpus of Rs 25,000 under the scheme. Further, if your medical expenses in a single instance exceed 70% of your total NPS Swasthya corpus, then you are permitted to withdraw the full 100% lump-sum prematurely, irrespective of the corpus size. This is something important and crucial for a NPS subscriber and this facility is not available in the regular NPS. 

The NPS Swasthya scheme is also built for speed and convenience. Subscribers can request funds through the MAven app, with the backend powered by Medi Assist Healthcare Services as the technology and claims partner. CAMS has been selected for KYC and onboarding, while Tata Pension Fund and Axis Pension Fund as designated pension fund managers. Aditya Birla Health Insurance will provide an integrated super top-up insurance cover. 

It is worth noting that NPS Swasthya is currently a Proof of Concept, not a fully rolled-out mainstream scheme. If the PoC period does not establish viability, subscribers will be given the option to transfer their corpus to the common NPS scheme and exit as per standard regulations. Opening and maintaining a common scheme NPS account alongside NPS Swasthya is also mandatory.

Annuity exit rules just got easier

If you are already a retired NPS subscriber who has purchased an annuity, there is another piece of good news that came through in May 2026. PFRDA issued a circular easing the rules around annuity surrender for retirees facing medical emergencies.

Under the NPS framework, retirees are required to use at least 40% of their corpus to buy an annuity at the time of exit. Once purchased, these annuity products are generally illiquid — you cannot exit them midway, which had been a source of serious frustration for retirees dealing with sudden medical costs.

The new PFRDA circular partially reverses this rigidity. Annuity service providers (ASPs) can now permit the surrender of annuity policies in two specific situations: where the annuitant or a family member is suffering from a critical illness, and where the annuity policy was issued before October 24, 2024 and already carried an explicit surrender clause.

The surrender is not automatic — the ASP will assess the request based on its own internal framework and must inform the annuitant of the final surrender value, provide a full written breakup of charges and deductions, and obtain written consent before processing. The surrender value is then credited directly to the retiree’s bank account. ASPs must also report all such cases to the Central Recordkeeping Agency within seven working days.

This is a meaningful, if limited, relief measure for retired NPS subscribers who previously had no exit option once their annuity was locked in.

Should you really rely on NPS?

Honestly speaking, not as your first preference for medical expenses or any emergency for that matter. NPS was exclusively introduced by the government as a market-linked retirement savings instrument because paying pension to government employees was a very big expense for the government and it was draining the government financially. 

Its withdrawal provisions for medical emergencies exist as a last resort, not as a primary healthcare funding mechanism. If you are solely dependent on NPS to handle a medical crisis, you are most probably under-insured.

The smarter approach is to use NPS Swasthya or the partial withdrawal facility as a fallback, while keeping a robust health insurance policy which must ideally be a sufficient sum insured for your city and family size. The health insurance policy must be your frontline protection. A dedicated emergency fund equivalent to at least six months of expenses adds another layer of security.

Meanwhile, for self-employed professionals, gig workers or small business owners without employer-provided health benefits, NPS Swasthya’s dual-benefit structure of  retirement corpus and mandatory health cover is a genuinely useful product that fills a real gap. If the scheme is used wisely, it can serve both goals without compromising either.

Frequently Asked Questions

1. Can I withdraw from NPS for a medical emergency?

Yes. Under standard NPS Tier-1 rules, you can withdraw up to 25% of your own contributions for medical treatment of yourself, your spouse, children or parents, provided you have been an NPS subscriber for at least three years.

2. How many times can I make a partial withdrawal from NPS?

Under regular NPS rules, you can make up to four partial withdrawals from a Tier-1 account before the age of 60, with a minimum gap of four years between each withdrawal.

3. Is NPS partial withdrawal for medical emergencies tax-free?

Yes. Partial withdrawals for medical emergencies from NPS are exempt from tax under Section 10 (12B) of the Income Tax Act, given you (as a subscriber) follow the rules laid down by PFRDA.

4. What is NPS Swasthya and how is it different?

NPS Swasthya is a scheme launched by PFRDA under its Regulatory Sandbox Framework that combines retirement savings with healthcare access. Unlike regular NPS, it allows unlimited partial withdrawals for medical expenses with no mandatory waiting period between withdrawals. The scheme also allows the subscribers a 100% lump-sum premature exit, if medical expenses exceed 70% of the corpus.

5. Can retired NPS subscribers exit their annuity for medical emergencies?

Yes, according to a May 2026 PFRDA circular, annuity service providers (ASP) may all the subscribers to surrender their annuity policies in cases of critical illness of the annuitant or a family member, subject to the ASP’s internal assessment process.