What is the NPS?
The National Pension System is a market-linked retirement scheme regulated by PFRDA. You contribute until 60, choosing an equity/debt mix, and the corpus grows. At 60 you may withdraw up to 60% tax-free as a lump sum; the remaining 40% must buy an annuity that pays a lifelong pension.
NPS carries an extra tax break in the old regime: ₹50,000 under Section 80CCD(1B), over and above the ₹1.5 lakh 80C limit — the only deduction of its kind. It is not available under the new regime, where the only NPS deduction that survives is the employer contribution under Section 80CCD(2).
Formula & worked example
Monthly compounding to 60, then a split:
Lump sum = Corpus × 60% (tax-free)
Pension = (Corpus × 40% × annuity rate) / 12
Worked example: ₹10,000 a month from age 30 to 60 at 10% → corpus of roughly ₹2.28 crore on ₹36 lakh invested. Taking 60% as a lump sum gives about ₹1.37 crore tax-free, and the ₹91.2 lakh annuity at 6% pays around ₹45,600 a month for life.
How to use this nps calculator
- Enter your monthly contribution including any employer NPS.
- Use 9–11% for an equity-tilted allocation, 8–9% for a conservative one.
- Annuity share must be at least 40%; you may choose more if you want a bigger pension.
- Annuity rates currently run 5.5–6.5% depending on the option chosen.
Smart tips
- Section 80CCD(1B) gives an extra ₹50,000 deduction beyond 80C in the old regime — worth ₹15,600 a year at a 30% slab. It is not available in the new regime.
- Employer NPS under 80CCD(2) is deductible even in the new tax regime, unlike almost everything else.
- Active Choice lets you set equity up to 75% until 50. Auto Choice de-risks automatically with age.
- The annuity income is taxable at your slab rate, even though the lump sum is not.
- NPS has the lowest fund management charges in India — around 0.09%, a fraction of mutual fund costs.
Frequently asked questions
How much pension will I get from NPS?
It depends on corpus and annuity rate. A ₹1 crore annuity corpus at 6% pays about ₹50,000 a month for life. This calculator shows your figure.
Is NPS maturity tax-free?
The 60% lump sum is fully tax-free. The 40% used to buy the annuity is not taxed at purchase, but the monthly pension is taxable at your slab.
Can I withdraw NPS before 60?
Partial withdrawals of up to 25% of your own contributions are allowed after three years for specified needs. Full exit before 60 requires 80% to go into an annuity.
Is NPS better than PPF or EPF?
NPS offers higher potential returns through equity exposure and, in the old regime, an extra ₹50,000 deduction, but locks money to 60 and forces an annuity. PPF and EPF are safer and fully liquid at maturity.
Want the theory behind the numbers? Read our NPS guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: Income Tax Department — slab rates, s.87A rebate, surcharge and 4% cess, AY 2026-27 (page updated 9 Jul 2026), Income Tax Department — deduction limits for AY 2026-27: 80C ₹1,50,000, 80CCD(1B) ₹50,000, 80D ₹25,000/₹50,000, 80TTA ₹10,000, 80TTB ₹50,000, s.24(b) ₹2,00,000 (page updated 9 Jul 2026). How we check these numbers.