NPS Calculator

NPS (National Pension System) is India's government-backed defined-contribution retirement scheme, regulated by PFRDA. You invest monthly until age 60, accumulating a corpus invested in your choice of equity (E), corporate bonds (C), and government securities (G) funds. NPS is ideal for: salaried employees who want an additional ₹50,000 tax deduction under 80CCD(1B) beyond the 80C limit; self-employed individuals building retirement savings; and those wanting disciplined retirement investing with equity exposure but without managing direct stocks. Private sector employees can open NPS through any Point of Presence (POP) bank or online via eNPS.

At age 60, you can withdraw up to 60% of your total NPS corpus as a completely tax-free lump sum. The remaining minimum 40% must be used to purchase an annuity (pension) from an empanelled IRDAI-regulated insurer. If the total corpus at 60 is below ₹5 lakh, you can withdraw the entire amount as a lump sum without annuity. The annuity pays a fixed monthly income for life (rate typically 6 to 7% of the annuity corpus per year). Choosing a 'joint life' annuity ensures your spouse continues receiving the pension after your death, while a 'return of purchase price' option returns the annuity corpus to nominees upon death.

NPS offers three layers of tax deduction - more than any other investment instrument. Section 80CCD(1): Your own NPS contribution up to 10% of salary (15% for self-employed) is deductible, subject to the overall ₹1.5 lakh 80C limit. Section 80CCD(1B): An additional ₹50,000 deduction exclusively for NPS, above and beyond the ₹1.5 lakh 80C cap. This alone saves ₹15,000 in taxes for someone in the 30% bracket. Section 80CCD(2): Employer's NPS contribution up to 14% of salary is deductible with no ceiling - available even under the new tax regime. The lump sum 60% withdrawal at retirement is tax-free; annuity income is taxable as salary.

An annuity is a fixed monthly income for life, purchased using a portion of your NPS corpus from an IRDAI-empanelled insurance company (LIC, SBI Life, HDFC Life, etc.). At retirement, you must use at least 40% of your corpus to buy an annuity. The annuity rate varies between 5.5% and 7% per annum depending on the insurer, annuity type, and whether you choose single or joint life option. Example: ₹40 lakh annuity corpus at 6.5% rate gives a monthly pension of approximately ₹21,667. The key limitation of annuity is that it does not keep pace with inflation - ₹21,667 today may feel inadequate 20 years into retirement when prices have doubled.

Yes, with limitations. Partial withdrawal (up to 25% of your own contributions, not the employer's) is allowed after 3 years for specific purposes: higher education of children, marriage of children or self, construction or purchase of first house, or treatment of critical illness (11 specified diseases). You can make up to 3 partial withdrawals in the entire NPS tenure. Full early exit before 60 (for those who joined before age 60) requires parking at least 80% of the corpus in an annuity - not ideal since annuity rates are currently low. The remaining 20% can be withdrawn as a lump sum. If the total corpus is below ₹2.5 lakh at exit, you can take the full amount.

Active Choice gives you control over allocation across equity (E, up to 75%), corporate bonds (C), and government bonds (G). Auto Choice (Lifecycle Fund) automatically reduces equity allocation as you age - starting at 75% equity at age 18 and reducing to 15% by age 55. For investors under 45 who are comfortable with markets, Active Choice with 75% equity (E fund) has historically delivered 12 to 14% CAGR in NPS - the best-performing pension fund tier. For those uncomfortable monitoring allocations, the Aggressive Lifecycle Fund (LC-75) under Auto Choice maintains higher equity for longer. The NPS equity fund invests in a mix of Nifty 50 and Sensex stocks, providing broad market exposure.

NPS and EPF both save for retirement, but with fundamental differences. EPF guarantees 8.25% annually with full EEE tax treatment, and withdrawals are completely tax-free after 5 years of service. NPS returns are market-linked (equity tier historically 12 to 14% CAGR), but only 60% of the maturity corpus is tax-free; the remaining 40% must be converted to a taxable annuity. EPF is mandatory for employees earning below Rs. 15,000 basic salary; NPS is voluntary for most private sector employees. EPF is fully accessible at retirement, while NPS mandates an annuity purchase for 40% of the corpus. The recommended approach for most salaried individuals: maximise employer EPF (mandatory), supplement with voluntary PPF for guaranteed tax-free returns, add NPS for the extra Rs. 50,000 deduction under 80CCD(1B), and use equity mutual funds for any additional long-term retirement savings beyond these instruments.