How the NPS calculator works
Enter your current age, the monthly amount you (and your employer, if any) will contribute, and an assumed annual return. The calculator compounds contributions monthly until age 60 to arrive at an estimated corpus. It then splits that corpus into a lump sum and an annuity purchase, and estimates the monthly pension from the annuity at an assumed annuity rate.
NPS money is invested across equity (E), corporate bonds (C), government securities (G) and alternative assets (A) in a mix you choose under Active choice, or one that shifts with age under Auto choice. The return you assume should reflect that mix: an equity-heavy allocation over 25–30 years might be illustrated at 10%, a conservative one lower.
The pension figure is the most uncertain part. Annuity rates are set by insurers at the time of purchase and vary with the annuity option (with or without return of purchase price, joint life and so on). Check the current rate before relying on the number.
Formula with variable key
Formula
Corpus = P × [((1 + r)^n − 1) / r] × (1 + r); Pension ≈ (Corpus × a) × A ÷ 12
- Where:
- P
- = monthly contribution (employee + employer)
- r
- = monthly return = assumed annual return ÷ 12 ÷ 100
- n
- = months until age 60 = (60 − current age) × 12
- a
- = share of corpus used to buy an annuity: none required for a corpus up to ₹8 lakh; the balance above the ₹6 lakh lump sum for a corpus between ₹8 lakh and ₹12 lakh; at least 20% above ₹12 lakh (this calculator lets you choose 20% to 40%)
- A
- = annual annuity rate offered by the insurer at the time of exit
Worked example in rupees
Anita is 30 and contributes ₹5,000 a month to NPS. She assumes a 10% annual return over 30 years.
- Total contributed = ₹5,000 × 360 = ₹18,00,000
- Estimated corpus at 60 ≈ ₹1,13,96,627 (about ₹1.14 crore)
- Since the corpus exceeds ₹12 lakh, she may take up to 80% as lump sum (≈ ₹91.2 lakh) and must use at least 20% (≈ ₹22.8 lakh) to buy an annuity
- If she chooses the traditional 60:40 split instead: lump sum ≈ ₹68.4 lakh, annuity purchase ≈ ₹45.6 lakh
- 60% of the corpus (≈ ₹68.4 lakh) withdrawn as lump sum is tax-free under Section 10(12A); pension received from the annuity is taxed as income at slab rates
At a 9% return the same contributions produce about ₹92 lakh; at 10% with ₹10,000 a month, about ₹2.28 crore. The rate and the contribution both matter far more than the exact age at which you start, as long as you start early.
This illustration assumes constant rates of 10%, 9% a year, assumed for this example; it is not a forecast. For reference, AMFI Best Practices Circular No. 109/2023-24 prescribes 12.93% for equity-fund illustrations: the mean of 10-year rolling returns of the Nifty 50 between 01/06/2013 and 30/05/2023 (Sensex 12.64%, 10-year G-Sec 7.20%). Calculators accept rates up to 13%.
Past performance may or may not be sustained in future and is not a guarantee of any future returns.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
NPS exit rules (PFRDA, December 2025) and comparison
| Corpus at exit | Lump sum allowed | Annuity purchase |
|---|---|---|
| Up to ₹8 lakh | 100% (entire corpus) | Not required |
| ₹8 lakh to ₹12 lakh | ₹6 lakh | Balance above ₹6 lakh |
| Above ₹12 lakh | Up to 80% | At least 20% |
Of the corpus, 60% withdrawn as lump sum is exempt under Section 10(12A). The tax treatment of any lump sum taken beyond 60% under the new 80% limit should be confirmed at the time of exit. Annuity income is taxable at your slab rate in the year received.
Tax benefits and common mistakes
- Section 80CCD(1B): an additional deduction of up to ₹50,000 for your own NPS contribution — available only under the old tax regime.
- Section 80CCD(2): employer's contribution to your NPS is deductible in both regimes (up to 10% of basic + DA under the old regime, 14% under the new regime). This is one of the few deductions the new regime keeps — ask your employer about a corporate NPS option.
- Mistake: choosing NPS only for the ₹50,000 deduction. Under the new regime that benefit does not exist; the reasons to use NPS are low cost, disciplined saving and the annuity structure.
- Mistake: assuming the whole corpus is yours at 60. A portion must buy an annuity unless the corpus is small, and annuity income is taxable.
- Mistake: ignoring the lock-in. Partial withdrawals before 60 are allowed only for specified reasons and within limits — check the current rules.
- Mistake: comparing NPS with a mutual fund SIP on return alone. Compare on liquidity, tax at exit and the mandatory annuity as well.
Frequently asked questions
What are the new NPS exit rules from December 2025?
For non-government subscribers exiting at 60: corpus up to ₹8 lakh can be withdrawn fully; between ₹8 lakh and ₹12 lakh, ₹6 lakh can be taken as lump sum and the rest must buy an annuity; above ₹12 lakh, up to 80% may be taken as lump sum with at least 20% going to an annuity.
Is the NPS lump sum tax-free?
60% of the corpus withdrawn as lump sum at exit is exempt under Section 10(12A). Confirm the treatment of any amount taken beyond 60% at the time of exit. The pension from the annuity is taxable at slab rates.
Is 80CCD(1B) available in the new regime?
No. The additional ₹50,000 deduction under Section 80CCD(1B) applies only under the old tax regime. Employer contributions under 80CCD(2) are deductible in both regimes.
What return should I assume for NPS?
It depends on your asset mix. An equity-heavy allocation over 25–30 years is often illustrated at around 10%; conservative allocations lower. No return is guaranteed — NPS is market-linked.
Can I withdraw from NPS before 60?
Partial withdrawals are permitted for specified purposes (such as higher education, marriage of children, house purchase or serious illness) within limits set by PFRDA. Premature exit rules are stricter than exit at 60. Check the current rules.
How is the NPS pension calculated?
The part of the corpus used to buy an annuity is multiplied by the insurer's annuity rate. The rate depends on the annuity option, your age and the insurer. Our calculator uses an assumed rate for illustration.
Who can open an NPS account?
Indian citizens (resident and non-resident) within the age range allowed by PFRDA can open a Tier I account; check the current eligibility on the PFRDA or CRA websites.
What is the difference between Tier I and Tier II?
Tier I is the pension account with tax benefits and withdrawal restrictions. Tier II is a voluntary savings account with free withdrawals and no tax benefit for most subscribers.
NPS or mutual fund SIP — which is better for retirement?
They serve different purposes. NPS offers very low cost and a structured pension but locks money and forces an annuity; a mutual fund SIP offers liquidity and flexibility with different taxation. Many people use both.
Does Two Plus Two Nine open NPS accounts?
We are an AMFI-registered Mutual Fund Distributor. NPS accounts are opened through points of presence and the eNPS portal; we can explain how NPS fits alongside mutual fund investing but we do not offer investment advice.