Plan your retirement corpus with India's National Pension System. Calculate maturity value, lump sum withdrawal, monthly pension, and tax benefits under Section 80C, 80CCD(1B), and 80CCD(2).
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₹2L
Extra Tax Benefit 80CCD(1B)
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9-10%
Avg Annual Returns
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60%
Tax-Free Lump Sum
💰 Tier I & II💸 Tax Benefits📊 Monthly Pension📄 PDF Export
📋 What is NPS? National Pension System is a government-sponsored pension scheme in India. It offers tax benefits and helps you build a retirement corpus through systematic contributions. Withdrawals at age 60 allow 60% lump sum (tax-free) and 40% must purchase an annuity for monthly pension.
Age between 18-60 years
Maximum 60 for Tier I (can extend to 70)
₹500📍 Current: ₹5,000₹50,000
Minimum ₹1,000 for Tier I 📌
0%20%
Expected yearly increment in contribution
4%15%
Tier I average: 9-10% (Mixed funds)
Upto 10% of basic salary (14% for govt)
For employer contribution calculation
4%8%
Current annuity rates: 5.5%-7%
Click to see your retirement corpus! 🚀
📊 Your NPS Retirement Plan
Total Maturity Value
₹ 0
Your Total Investment
₹ 0
Returns Earned
₹ 0
Lump Sum (60%)
₹ 0
Tax-free withdrawal
Annuity Amount (40%)
₹ 0
Mandatory annuity purchase
Monthly Pension
₹ 0
Estimated pension income
💸 Annual Tax Savings
📅 Year-wise Breakdown
What is National Pension System (NPS)?
National Pension System (NPS) is a voluntary defined contribution pension system in India, regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It was introduced by the Government of India to provide retirement income to all Indian citizens.
Key Features of NPS
Two Tiers: Tier I (retirement account with tax benefits) and Tier II (voluntary savings without lock-in)
Flexible Investment: Choose between Equity (E), Corporate Bonds (C), Government Securities (G), and Alternative Assets (A)
Low Cost: One of the lowest-cost pension products globally
Portable: Can be transferred across jobs and locations
Tax Benefits: Deductions under Sections 80C, 80CCD(1B), and 80CCD(2)
Professional Management: Managed by PFRDA-empaneled pension fund managers
Who Can Invest in NPS?
All Indian citizens aged 18-70 years
NRIs (Non-Resident Indians) are also eligible
Corporate employees can join Corporate NPS through their employer
Self-employed individuals and professionals
Tier I vs Tier II
Feature
Tier I
Tier II
Lock-in Period
Until age 60 (can extend to 70)
No lock-in, withdraw anytime
Tax Benefits
Yes (80C, 80CCD)
No (unless government employee)
Minimum Contribution
₹1,000 per year
₹250 per contribution
Withdrawal
60% lump sum, 40% annuity
Full withdrawal allowed
Purpose
Retirement savings
Short-term savings
How is NPS Maturity Value Calculated?
Calculation Formula
NPS maturity value is calculated using compound interest formula with monthly contributions:
Contributions to NPS Tier I qualify for tax deduction up to ₹1.5 lakh under Section 80CCD(1), which is part of the overall ₹1.5 lakh limit under Section 80C.
Section 80CCD(1B) - Additional Deduction
An additional deduction of ₹50,000 is available exclusively for NPS contributions, over and above the ₹1.5 lakh limit under Section 80C.
💡 Key Benefit: This makes NPS one of the few instruments where you can claim a total deduction of ₹2 lakh (₹1.5L under 80C + ₹50K under 80CCD(1B))
Section 80CCD(2) - Employer Contribution
Employer's contribution to NPS is eligible for tax deduction up to:
10% of salary (Basic + DA) for private sector employees
14% of salary for central government employees
This is over and above the ₹2 lakh limit (80C + 80CCD(1B))
Tax on Withdrawal
Withdrawal Type
Tax Treatment
60% Lump Sum at retirement
Completely Tax-Free
40% Annuity purchase amount
Tax-Free
Monthly pension from annuity
Taxable as per slab
Partial withdrawal (20% max)
Tax-Free (up to 3 times)
Tax Savings Example
Annual Contribution: ₹2,00,000
Tax Slab: 30%
Tax Saved = ₹2,00,000 × 30% = ₹60,000 per year
Frequently Asked Questions (FAQ)
What is the minimum and maximum contribution in NPS?
Tier I: Minimum ₹1,000 per year. There is no maximum limit, but tax benefits are capped. Tier II: Minimum ₹250 per transaction, ₹2,000 per year. No maximum limit.
Can I withdraw money from NPS before retirement?
Yes, partial withdrawals are allowed:
• After 3 years of opening the account
• Up to 25% of your contributions (not total corpus)
• Maximum 3 withdrawals during the entire tenure
• Allowed for specific purposes: children's education, marriage, medical emergencies, house purchase
What happens if I don't contribute regularly?
NPS Tier I account becomes "frozen" if minimum annual contribution of ₹1,000 is not made. You'll need to pay a penalty of ₹100 per year of non-contribution plus arrears to reactivate. However, your existing corpus continues to earn returns even when frozen.
How do I choose between Active and Auto Choice?
Active Choice: You decide the allocation between Equity (E), Corporate Bonds (C), Government Securities (G), and Alternative Assets (A). Maximum 75% in Equity.
Auto Choice (Life Cycle Fund): Asset allocation automatically changes based on your age. Equity exposure reduces as you age. Recommended for those who don't want to actively manage.
Is NPS better than PPF or mutual funds?
It depends on your goals: NPS advantages: Extra ₹50K tax deduction, potential for higher returns (equity exposure), professionally managed NPS disadvantages: Lock-in until 60, mandatory annuity purchase (40%), pension is taxable PPF: Completely tax-free, flexible withdrawals after 5 years, but lower returns (~7-8%) Mutual Funds: No lock-in, full liquidity, but no additional tax benefits like NPS 80CCD(1B)
What are annuity rates and how do they affect my pension?
Annuity rate is the annual return you receive from the insurance company on your annuity purchase amount. Current rates range from 5.5% to 7% depending on:
• Type of annuity (life only, with return of purchase price, joint life, etc.)
• Your age at retirement
• Insurance company
Example: If you have ₹1 Crore for annuity at 6% rate:
Annual Pension = ₹1,00,00,000 × 6% = ₹6,00,000
Monthly Pension = ₹6,00,000 ÷ 12 = ₹50,000
Can NRIs invest in NPS?
Yes, NRIs can open and invest in NPS. However:
• Can contribute in Indian Rupees only
• If they return to India, they can continue the account as a resident
• If they become resident of another country permanently, they must close the NPS account and can withdraw as per exit norms
What happens to my NPS account if I die before retirement?
In case of death of the subscriber before age 60:
• Nominee receives 100% of the accumulated pension wealth
• No mandatory annuity purchase requirement
• Entire amount is paid to the nominee/legal heir as lump sum
• The amount is tax-free in the hands of the nominee
Can I have both NPS and EPF?
Yes, you can have both NPS and EPF (Employees' Provident Fund) simultaneously. Both serve as retirement savings, and both offer tax benefits:
• EPF: Mandatory for salaried employees, tax deduction under Section 80C
• NPS: Voluntary, additional ₹50K deduction under Section 80CCD(1B)
Many employees use both to maximize retirement savings and tax benefits.
How often can I change my fund allocation?
If you've chosen Active Choice:
• You can change your asset allocation once per financial year for free
• Additional changes allowed at a minimal fee
• You can switch between Auto Choice and Active Choice once per financial year
• You can also change your pension fund manager once per financial year
This calculator provides estimates based on inputs provided and assumed rate of returns. Actual NPS returns depend on market performance and fund manager decisions. Past performance does not guarantee future results. Tax benefits are as per current Income Tax laws and may change. Please consult a financial advisor for personalized retirement planning advice. CalcArena is not responsible for investment decisions made based on these calculations.