NPS Pension Calculator — Retirement Corpus & Monthly Pension
NPS Tier I vs Tier II
Tier I is the mandatory pension account with lock-in until age 60 (partial withdrawals allowed after 3 years for specific purposes). Tier II is a voluntary savings account with no lock-in — but no tax benefits except for government employees. This calculator covers Tier I.
Tax Benefits — Three Deduction Sections
- Section 80CCD(1): Your own contribution — up to 10% of salary (or 20% of gross income for self-employed), within the overall ₹1.5 lakh 80C limit.
- Section 80CCD(1B): Additional ₹50,000 deduction, over and above the ₹1.5 lakh 80C ceiling. This is unique to NPS — no other instrument offers this extra deduction.
- Section 80CCD(2): Employer's NPS contribution — up to 14% of salary (central govt) or 10% (private sector) — fully deductible without any ceiling.
At Retirement: The 60-40 Split
At age 60, the corpus is split:
- 60% as lump sum — completely tax-free (since 2019 Finance Act)
- 40% must be used to purchase an annuity — this generates a monthly pension. Annuity income is taxable as salary at your applicable slab rate.
The annuity rate used in this calculator is 6% p.a. — an indicative rate. Actual rates vary by PFRDA-registered annuity service providers (ASPs) like LIC, SBI Life, HDFC Life. Rates currently range from 5.5% to 7% depending on the annuity type and provider.
Partial Withdrawal Rules (Tier I)
After 3 years of NPS membership, partial withdrawals are allowed (maximum 3 times) for: higher education, marriage, purchase/construction of first house, treatment of serious illness, or starting a new business. Maximum 25% of own contributions can be withdrawn.
Frequently Asked Questions
Is NPS better than PPF for retirement?
NPS offers potentially higher returns (market-linked, ~10–12% historically) and an additional ₹50,000 deduction under 80CCD(1B), but the annuity (40% of corpus) is taxable as income. PPF offers guaranteed 7.1% fully tax-free but has a ₹1.5 lakh annual deposit cap. For retirement planning, combining both is usually optimal — PPF for the tax-free EEE corpus, NPS for the extra ₹50K deduction and higher return potential.
Can I withdraw the full NPS corpus before retirement?
Premature exit (before age 60) after 3 years requires using 80% of the corpus to buy an annuity; only 20% can be taken as lump sum. Before 3 years, the account can be closed only on the subscriber's death or incapacitation. Full corpus withdrawal is allowed only if the total corpus is ₹5 lakh or less.
Is the NPS annuity taxable?
Yes. The monthly pension received from the annuity is taxable as income under the head "Salaries" (for government employees) or "Income from Other Sources" (for others), at your applicable income tax slab rate. Only the 60% lump sum at retirement is tax-free.
What is the minimum NPS contribution per year?
Tier I requires a minimum of ₹1,000 per year (not per month). However, to maintain an active account and build a meaningful corpus, monthly contributions of ₹500+ are recommended.