How the NPS calculator works

The National Pension System (NPS) is a government-regulated, market-linked retirement scheme. You contribute regularly until retirement, the money grows in a mix of equity and debt, and at retirement part of the corpus is converted into a lifelong pension.

This calculator first grows your monthly contributions until retirement using the future value of an annuity (the same compounding as an SIP). It then splits the corpus: the annuity percentage you choose (minimum 40%) buys an annuity, and the rest is a tax-free lump sum. Monthly pension = (annuity corpus × annuity rate) ÷ 12.

Enter your monthly contribution, expected return, current age, retirement age (default 60), the annuity percentage (default 40%) and the assumed annuity rate (default 6%). The tool instantly shows your total corpus, the lump sum and your estimated monthly pension.

How the corpus splits at retirement

• At age 60 up to 60% of the corpus can be withdrawn as a tax-free lump sum.
• At least 40% of the corpus must buy an annuity that pays your monthly pension.
• A higher annuity percentage means a larger pension but a smaller lump sum.
• The annuity rate is the return the annuity provider offers — typically 5–7%.
• The monthly pension you receive is taxable at your slab rate.

NPS tax benefits: 80CCD(1), 80CCD(1B) and 80CCD(2)

NPS offers some of the deepest tax deductions available. Your own contribution is deductible under Section 80CCD(1) within the overall ₹1.5 lakh limit of Section 80C, plus an exclusive extra ₹50,000 under Section 80CCD(1B) — taking the total to ₹2 lakh in the old regime.

On top of that, an employer’s contribution to your NPS is deductible under Section 80CCD(2) (up to 10% of salary, or 14% for government employees) and this benefit is available even under the new tax regime. The 60% lump sum at retirement is tax-free, while the monthly pension is taxable. A chartered accountant can structure salary and contributions to capture the full 80CCD(1B) and 80CCD(2) benefits.

Example: ₹10,000/month from age 30 to 60

Contributing ₹10,000 a month from age 30 to 60 (30 years) at an assumed 10% return builds a corpus of roughly ₹2.28 crore. If you annuitise 40% (about ₹91 lakh) at a 6% annuity rate, you draw a tax-free lump sum of about ₹1.37 crore and an estimated monthly pension of about ₹45,500. Choosing a higher annuity percentage trades lump sum for a bigger pension.

For CA firms and advisors

Chartered accountants and advisors use NPS projections in client retirement planning to size contributions toward a target pension, illustrate the additional 80CCD(1B) and 80CCD(2) deductions, and compare NPS against PPF and mutual fund SIPs. Returns and annuity rates are assumptions — present a conservative-to-optimistic range rather than a single number.

Illustrative NPS corpus (₹10,000/month at 10%, retire at 60, 40% annuity @ 6%)