NPS Calculator
Estimate your National Pension Scheme corpus and plan for retirement
Retirement Projections
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Total Interest Earned
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Total Corpus at Retirement
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Lump Sum Withdrawal
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Amount for Annuity
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Expected Monthly Pension
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Investment Breakdown
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Corpus Growth Projection
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NPS Investment Tips
- Start Early: The power of compounding works best over longer durations.
- Choose Asset Allocation Wisely: Balance between equity, corporate debt, and government securities based on your risk appetite (Active Choice vs. Auto Choice).
- Increase Contribution: Consider increasing your contribution with salary hikes.
- Tax Benefits: Utilize tax deductions under Sec 80CCD(1), Sec 80CCD(1B), and Sec 80CCD(2).
- Review Periodically: Review your NPS portfolio and fund manager performance annually.
Introduction to National Pension Scheme (NPS)
The National Pension Scheme (NPS) is a voluntary, defined contribution retirement savings scheme designed to enable systematic savings during one's working life. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). NPS aims to provide retirement income to all citizens of India.
What is NPS?
NPS is a market-linked product that offers various investment options to subscribers. Upon retirement or attaining a certain age, subscribers can withdraw a part of the corpus as a lump sum and use the remaining amount to purchase an annuity plan for a regular pension.
How Does NPS Work?
- Contribution: You make regular contributions (monthly or yearly) to your NPS account during your working years.
- Investment: Your contributions are invested in a mix of assets like equity, corporate bonds, and government securities, based on your chosen Pension Fund Manager (PFM) and investment choice (Active or Auto).
- Accumulation: The value of your investment grows over time based on market performance.
- Retirement:
- At retirement (typically age 60), you can withdraw up to 60% of the accumulated corpus as a tax-free lump sum.
- The remaining minimum 40% (or more, if you choose) must be used to purchase an annuity plan from an Annuity Service Provider (ASP) registered with PFRDA. This annuity provides a regular monthly pension.
- If the total corpus is less than or equal to ₹5 lakh at retirement (age 60 or superannuation), the subscriber can opt for 100% lump sum withdrawal.
- Premature Exit: Subscribers can exit prematurely after 5 years (conditions apply), where up to 20% can be withdrawn as lump sum and minimum 80% must be annuitized. If total corpus is ≤ ₹2.5 lakh, 100% withdrawal is allowed.
The approximate future value of your NPS contributions can be estimated using a variation of the future value of an annuity formula, considering periodic contributions and compounding returns.
How to Use Our NPS Calculator?
- Enter your "Monthly Contribution" amount.
- Input your "Current Age" and desired "Retirement Age".
- Provide the "Expected Rate of Return" on your NPS investments.
- Specify the "Percentage to Purchase Annuity" from your retirement corpus.
- Enter the "Expected Annuity Rate" to estimate your monthly pension.
- The calculator will display your total investment, interest earned, total corpus, lump sum withdrawal, amount for annuity, and expected monthly pension.
Benefits of NPS
- Retirement Planning: Helps build a substantial retirement corpus.
- Tax Benefits: Offers tax deductions under Section 80CCD(1) (up to ₹1.5 lakh within 80C limit), Section 80CCD(1B) (additional ₹50,000), and Section 80CCD(2) (employer's contribution).
- Flexibility: Choice of Pension Fund Managers, investment options (Active/Auto), and annuity providers.
- Portability: NPS account is portable across jobs and locations.
- Low Cost: NPS is one of the lowest-cost pension products globally.
- Regulated: Managed by PFRDA, ensuring transparency and safety.
Frequently Asked Questions (FAQs) about NPS
Q: Who can invest in NPS?
A: Any Indian citizen (resident or non-resident) aged between 18 and 70 years can join NPS. OCIs (Overseas Citizens of India) and PIOs (Persons of Indian Origin) cardholders are also eligible.
Q: What are Tier I and Tier II accounts in NPS?
A: Tier I: This is the primary, non-withdrawable retirement account with tax benefits. Tier II: This is a voluntary, withdrawable account. To open a Tier II account, you must have an active Tier I account. There are no tax benefits for Tier II contributions for private sector employees, but it offers flexibility for withdrawals.
Q: What are Active Choice and Auto Choice investment options?
A: Active Choice: Subscribers can decide their asset allocation mix among Equity (E), Corporate Bonds (C), Government Securities (G), and Alternative Investment Funds (AIF). Auto Choice: This is a lifecycle-based fund where the asset allocation changes automatically based on the subscriber's age.
Q: Is the pension received from annuity taxable?
A: Yes, the pension received from the annuity is treated as income and taxed as per the applicable income tax slab rates.