NPS Calculator
Calculate your retirement corpus, pension & tax savings
Investment Details
Optional - for salaried employees
Min 40% mandatory
Retirement Projection
Total Invested
₹18.00 L
Corpus at 60
₹1.14 Cr
Monthly Pension
₹22,793
Tax Saved (Total)
₹9.90 L
Investment vs Returns
Total Corpus
₹1.14 Cr
Corpus Growth Over Time
At Retirement (Age 60)
Lump Sum (60% max)
₹68.38 L
Tax-free withdrawal
Annuity (40%)
₹45.59 L
For monthly pension
Monthly Pension
₹22,793
@ 6% annuity rate
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National Pension System (NPS) - Complete Guide FY 2025-26
The National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme designed to help citizens systematically save for their golden years. Regulated by the Pension Fund Regulatory and Development Authority (PFRDA), NPS offers market-linked returns with professional fund management, making it one of the most efficient retirement planning tools in India.
How NPS Works
When you join NPS, you get a Permanent Retirement Account Number (PRAN) that stays with you for life. You contribute regularly during your working years, and these contributions are invested in a mix of equity, corporate bonds, government securities, and alternative assets based on your chosen investment option (Active Choice or Auto Choice). At retirement, you can withdraw up to 60% of the accumulated corpus as a tax-free lump sum, while the remaining 40% must be used to purchase an annuity that provides you with a regular monthly pension.
Tax Benefits - The Triple Advantage
NPS offers unmatched tax benefits under three sections of the Income Tax Act. Under Section 80CCD(1), your contribution up to 10% of salary (20% for self-employed) qualifies for deduction within the overall ₹1.5 lakh limit of Section 80C. Section 80CCD(1B) provides an exclusive additional deduction of ₹50,000 over and above the 80C limit. For salaried employees, employer contributions up to 14% (government) or 10% (private sector) of salary are deductible under Section 80CCD(2) without any monetary ceiling, making it particularly attractive for those in higher tax brackets.
Investment Options and Asset Allocation
NPS offers two investment choices: Active Choice lets you decide your asset allocation across Equity (E - max 75%), Corporate Bonds (C), Government Securities (G), and Alternative Assets (A - max 5%). Auto Choice (Lifecycle Fund) automatically adjusts your portfolio based on age, reducing equity exposure as you approach retirement. Historical NPS returns have ranged between 9-12% for equity schemes and 7-9% for debt schemes, making it competitive with other retirement instruments.
Withdrawal Rules and Flexibility
NPS matures at age 60, but you can extend it up to 70 years. Premature exit is allowed after 5 years of membership, subject to using 80% of the corpus for annuity. Partial withdrawals up to 25% of your own contribution are permitted after 3 years for specific purposes like children's education, marriage, medical emergencies, or home purchase. These withdrawals are tax-free, adding to the scheme's flexibility.
Frequently Asked Questions
What is NPS (National Pension System)?
NPS is a government-sponsored pension scheme regulated by PFRDA. It helps you build a retirement corpus through systematic investments during your working years. At retirement, you can withdraw up to 60% as lump sum (tax-free) and must use at least 40% to purchase an annuity for regular pension.
What are the tax benefits of NPS?
NPS offers triple tax benefits: (1) Section 80CCD(1): Employee contribution up to 10% of salary within ₹1.5L 80C limit, (2) Section 80CCD(1B): Additional ₹50,000 deduction over and above 80C, (3) Section 80CCD(2): Employer contribution up to 14% (govt) or 10% (private) of salary is deductible without any limit.
What are NPS Tier 1 and Tier 2 accounts?
Tier 1 is the default pension account with withdrawal restrictions until age 60 (except specific conditions). It offers all tax benefits. Tier 2 is a voluntary investment account with no withdrawal restrictions but no tax benefits under 80C. You need Tier 1 to open Tier 2.
How is the annuity pension calculated?
At retirement, minimum 40% of corpus must be used to buy an annuity from PFRDA-empanelled insurance companies. Your monthly pension depends on the annuity rate (typically 5-7%) and the amount invested. For example, ₹40 lakh at 6% gives ₹20,000 monthly pension.
What are the NPS withdrawal rules?
At 60 years: Max 60% lump sum (tax-free), min 40% annuity. Early exit (before 60): Allowed only after 5 years, max 20% lump sum, 80% annuity. Partial withdrawal: Up to 25% of own contribution allowed after 3 years for specific purposes (education, marriage, medical, home purchase).
NPS vs PPF vs ELSS - Which is better?
Each has different purposes: NPS is for retirement with market-linked returns (~10% historically), has longer lock-in till 60, and provides pension. PPF offers guaranteed 7-8% returns with 15-year lock-in. ELSS offers shortest 3-year lock-in with equity returns but no pension. Diversify across all three based on goals.