How to use this calculator
- Monthly contribution — what you'll invest each month until 60.
- Expected return — depends on your asset mix. Historically 9–11% has been reasonable for equity-tilted allocations, 8–9% for balanced.
- Current age — the calculator projects growth up to age 60.
- Annuity rate — what your annuity provider will pay annually on the 40% portion. Currently around 6–7%.
How NPS actually works
You contribute monthly into a fund managed by a pension fund manager of your choice. At 60:
- Up to 60% can be withdrawn as a lump sum, and this withdrawal is tax-free.
- At least 40% must be used to purchase an annuity, which pays you a regular pension for life. That pension is taxable as income.
Asset allocation choices
- Active choice — you pick the split across equity (E), corporate bonds (C), government securities (G) and alternatives (A). Equity is capped at 75% until age 50, tapering thereafter.
- Auto choice — allocation shifts automatically from equity towards debt as you age. Available in aggressive, moderate and conservative variants.
NPS has among the lowest fund management charges of any Indian retirement product, which compounds into a meaningful advantage over three decades.
Worked example
Age 30, contributing ₹5,000 a month, expecting 10% returns, annuity at 6%:
| Item | Amount |
|---|---|
| Years to 60 | 30 |
| Total contributed | ₹18,00,000 |
| Corpus at 60 | ≈ ₹1,13,96,000 |
| Lump sum (60%, tax-free) | ≈ ₹68,38,000 |
| Annuity portion (40%) | ≈ ₹45,58,000 |
| Monthly pension at 6% | ≈ ₹22,790 |
₹18 lakh contributed turns into roughly ₹1.14 crore. Almost all of that is compounding, not contribution — which is the entire argument for starting young.
Why starting age matters so much
₹5,000 a month at 10% until age 60:
| Start age | Years | Total invested | Corpus at 60 |
|---|---|---|---|
| 25 | 35 | ₹21,00,000 | ≈ ₹1,91,00,000 |
| 30 | 30 | ₹18,00,000 | ≈ ₹1,14,00,000 |
| 35 | 25 | ₹15,00,000 | ≈ ₹66,80,000 |
| 40 | 20 | ₹12,00,000 | ≈ ₹38,30,000 |
| 45 | 15 | ₹9,00,000 | ≈ ₹20,90,000 |
Starting at 25 instead of 35 costs an extra ₹6 lakh in contributions and produces about ₹1.24 crore more. Ten years is worth more than any fund selection decision you'll make.
Tax benefits and withdrawal rules
Old regime deductions
- Section 80CCD(1) — part of the ₹1.5 lakh 80C ceiling.
- Section 80CCD(1B) — an additional ₹50,000, over and above 80C. This is NPS's standout feature.
- Section 80CCD(2) — employer contribution, deductible separately.
Withdrawal
- At 60 — up to 60% lump sum tax-free, minimum 40% to annuity.
- Corpus up to ₹5 lakh — full withdrawal permitted without buying an annuity.
- Partial withdrawal — up to 25% of your own contributions, after three years, for specified purposes such as higher education, marriage, medical treatment or buying a house.
- Exiting before 60 — only 20% can be withdrawn; 80% must go to an annuity.
Common mistakes
- Treating the projected corpus as guaranteed. It isn't — returns are market-linked.
- Forgetting that the annuity pension is taxable, even though the lump sum isn't.
- Choosing an over-conservative allocation at 28. Thirty years is a long time to sit in debt funds.
- Assuming the ₹50,000 extra deduction applies under the new regime. It doesn't.
- Overlooking how illiquid NPS is — the money is locked until 60 in most circumstances.
- Relying on NPS alone. Most people also need EPF, equity and their own savings.
Frequently Asked Questions
What return should I assume for NPS?
It depends on your asset mix. Equity-heavy allocations have historically returned around 10–12%, balanced ones 8–10%. These are averages over long periods, not guarantees.
How much of my NPS corpus is tax-free?
Up to 60% withdrawn as a lump sum at 60 is tax-free. The remaining 40% buys an annuity, and the pension it pays is taxable as income.
Is the ₹50,000 extra deduction available in the new regime?
No. Section 80CCD(1B) applies only in the old regime. Employer contributions under 80CCD(2) generally remain deductible in both.
Can I withdraw from NPS before 60?
Partial withdrawal of up to 25% of your own contributions is allowed after three years for specified purposes. A full early exit permits only 20% as a lump sum, with 80% going to an annuity.
What happens if my corpus is small?
If the total corpus is up to ₹5 lakh at 60, you may withdraw the entire amount without purchasing an annuity.
Which is better, NPS or PPF?
PPF gives guaranteed, tax-free returns with a 15-year lock-in. NPS is market-linked with higher potential returns, lower charges and an extra ₹50,000 deduction, but locks money until 60 and makes the pension taxable. Many people hold both.
Can I change my pension fund manager?
Yes, NPS allows you to switch fund manager and asset allocation, subject to the scheme's limits on frequency.
Is NPS better than EPF?
They're complementary. EPF is largely debt with a declared rate; NPS offers equity exposure and lower charges. Most salaried people end up with EPF automatically and add NPS voluntarily.
What is a typical annuity rate?
Around 6–7% currently, varying by provider and the annuity type you choose. Options that continue paying a spouse after your death pay a lower rate.
Related calculators and guides
Official sources: NPS Trust · PFRDA
Disclaimer. This calculator provides estimates for general guidance only and is not financial, tax or legal advice. Rates, rules and limits change, and your own situation may differ. Please verify current figures with the relevant authority or a qualified professional before acting on them.