NPS Calculator

What is the National Pension System?

The National Pension System (NPS) is a government-backed retirement scheme regulated by PFRDA. You contribute regularly during your working years, the money is invested in a mix of equity, corporate bonds and government securities by professional fund managers, and at retirement the corpus is split between a lump sum you can withdraw and an annuity that pays you a monthly pension for life. Any Indian citizen between 18 and 70 can open a Tier I account, and contributions of up to ₹50,000 a year get an extra deduction under Section 80CCD(1B) on top of the ₹1.5 lakh 80C limit under the old regime.

How this NPS calculator works

Enter your monthly contribution, the return you expect from your chosen asset mix, your current age and the age at which you plan to retire. The calculator compounds each contribution monthly until retirement, then applies the withdrawal rules: at least 40% of the corpus must be used to buy an annuity, and the rest (up to 60%) can be taken as a tax-free lump sum. The monthly pension is the annuity rate applied to the annuity corpus, divided by twelve.

Choosing an expected return

NPS returns are not fixed. Under Active Choice you can put up to 75% in equity (scheme E) until age 50; under Auto Choice the equity share falls automatically as you age. Over the last decade, equity schemes have delivered roughly 10–13% a year, corporate bond schemes 8–9% and government bond schemes 7–8%. A blended portfolio for a 30-year-old commonly lands around 9–10%, which is why 10% is the default here. Use a lower figure to stress-test your plan.

Lump sum vs annuity

The 60% lump sum is completely tax-free under Section 10(12A). The annuity, bought from a PFRDA-empanelled insurer such as LIC, SBI Life or HDFC Life, pays a fixed monthly amount that is taxed as income in the year you receive it. Annuity rates depend on the plan you choose: a plan with return of purchase price to your nominee pays less (around 5.5–6.5%) than one without (7% or more). You can move the annuity share above 40% if you want a larger pension and a smaller lump sum.

Example

A 30-year-old contributing ₹5,000 a month at 10% builds a corpus of about ₹1.14 crore by 60 from an investment of ₹18 lakh. Taking 60% as lump sum gives ₹68 lakh tax-free; the remaining ₹45.6 lakh at a 6% annuity rate pays roughly ₹22,800 a month for life. Increasing the contribution by 10% every year, as your salary grows, more than doubles that outcome.

Things to remember

• Partial withdrawals of up to 25% of your own contributions are allowed after three years for specific needs such as education, marriage, a house or medical treatment.
• If the corpus at 60 is ₹5 lakh or less, you may withdraw the whole amount without buying an annuity.
• Employer contributions to NPS up to 10% of basic (14% for government employees) are deductible under Section 80CCD(2) even in the new tax regime.
• Returns shown are estimates; actual results depend on market performance and the fund manager.

Frequently asked questions