NPS Calculator

NPS is a voluntary, government-regulated retirement savings scheme launched in 2004, initially for government employees and extended to all Indian citizens in 2009. Any Indian citizen aged 18-65 years can open an NPS account (Tier-I and optionally Tier-II). NRIs are also eligible. NPS is managed by professional fund managers appointed by PFRDA, and subscribers can choose from equity, corporate bonds, and government securities based on their risk appetite. The scheme is designed to provide market-linked returns with low fund management charges (0.01% to 0.09%), making it one of the most cost-effective retirement products.

NPS offers exceptional tax benefits: (1) Section 80CCD(1) allows deduction up to 10% of salary/20% of gross income within the overall ₹1.5 lakh limit under Section 80C. (2) Section 80CCD(1B) provides an additional exclusive deduction of ₹50,000 over and above the 80C limit—this is NPS's biggest advantage. (3) Employer contributions up to 10% of salary (14% for central government employees) qualify for deduction under Section 80CCD(2) with no upper limit. (4) At retirement, 60% lump sum withdrawal is completely tax-free. (5) The annuity portion is taxed as regular income only when pension is received. For high earners in 30% tax bracket, these benefits can save significant tax annually.

While EPF, PPF, and NPS are all retirement products, they differ significantly: EPF is mandatory for salaried employees with fixed returns (currently 8.15%) and complete tax-free maturity under EEE status. PPF has a 15-year lock-in with guaranteed returns (currently 7.1%) and is fully tax-free. NPS, however, is voluntary with no upper contribution limit, offers market-linked returns (historically 8-12%), has much lower fund management charges, and provides flexibility in asset allocation. NPS's key advantage is the extra ₹50,000 tax deduction under 80CCD(1B). The downsides are that only 60% is tax-free at maturity, pension from annuity is taxable, and corpus access is restricted until age 60. NPS is best suited for aggressive retirement planning alongside EPF/PPF.

NPS has two account types: Tier-I is the main pension account with restricted access designed for long-term retirement savings. Withdrawals are limited—only allowed at retirement (age 60), for specified emergencies (25% after 3 years), or premature exit (80% must go to annuity before age 60). Tier-I qualifies for all tax benefits under Sections 80CCD(1), 80CCD(1B), and 80CCD(2). Minimum contribution is ₹500/month or ₹6,000/year. Tier-II is a voluntary savings account with complete liquidity—you can withdraw anytime without restrictions. However, Tier-II does not offer any tax benefits (except for central/state government employees under Section 80C). Tier-II requires a minimum ₹2,000 opening balance and ₹1,000 per transaction. You can only open Tier-II if you have an active Tier-I account.

NPS returns are market-linked and depend on your asset allocation across three classes: Equity (E), Corporate Bonds (C), and Government Securities (G). Subscribers under 50 can allocate up to 75% in equity, while those above 50 can have maximum 50% equity (auto-adjusted annually). Historical returns: NPS equity funds have delivered 10-14% over 10 years, corporate bond funds 8-10%, and government securities 7-9%. Returns vary by fund manager—SBI Pension Fund, HDFC Pension Fund, ICICI Prudential Pension Fund, UTI Retirement Solutions, etc., all have different performance records. The calculator uses expected returns you input (typically 8-12%) to project future corpus using the compound interest formula. Aggressive (high equity) allocation offers higher growth potential but more volatility, while conservative (debt-heavy) allocation provides stability but lower returns.

NPS withdrawal rules vary by situation: (1) Normal Exit (Age 60-75): You can withdraw up to 60% as tax-free lump sum; remaining 40% must be used to purchase annuity for monthly pension. You can defer exit up to age 75. (2) Premature Exit (Before 60): Allowed after 10 years—80% must go to annuity, only 20% can be withdrawn as lump sum (taxable). (3) Partial Withdrawal: Permitted after 3 years for specific purposes like children's education, marriage, buying/building house, or critical illness treatment. You can withdraw up to 25% of your contributions (not corpus) maximum 3 times during the entire NPS tenure. (4) Exit with Small Corpus: If total corpus is ≤₹5 lakh at retirement, you can withdraw 100% as lump sum without mandatory annuity purchase. These rules ensure NPS serves its primary purpose—providing retirement income security.

At retirement, you use 40-100% of your NPS corpus to purchase an annuity from PFRDA-empanelled insurance companies (LIC, SBI Life, HDFC Life, etc.). Annuity options include: (1) Life Annuity: Pension for your lifetime; stops after your death; highest pension rate but no residual benefit for family. (2) Annuity with Return of Purchase Price: Pension for life; after death, purchase price returned to nominee; lower pension rate but capital protected. (3) Joint Life Annuity: Pension continues for spouse after your death; pension reduces after first death; suitable for married couples. (4) Increasing Annuity: Pension increases annually (typically 3-5%) to beat inflation; starts with lower initial pension. Annuity rates vary (5-7% annually) and depend on age, interest rate environment, and chosen plan. Compare rates across insurers before purchase. Remember, annuity purchase is irreversible and pension is taxable as income.

Yes, NPS offers flexibility to switch: (1) Fund Manager Change: You can change your pension fund manager once a year free of cost. Compare performance of SBI, HDFC, ICICI, UTI, Kotak, Aditya Birla, and other fund managers on the PFRDA website and switch to better-performing managers. (2) Asset Allocation Change: You can modify your allocation between Equity (E), Corporate Bonds (C), and Government Securities (G) anytime. Use the Active Choice option to manually set allocation or Auto Choice where allocation automatically becomes conservative as you age. (3) Investment Choice: You can switch between Active and Auto Choice once a year. The switches can be done online through the eNPS portal, NSDL CRA portal, or through your Point of Presence (POP). Strategic switching based on market conditions and fund performance can significantly improve your retirement corpus.

NPS is fully portable across jobs and geography—one of its biggest advantages. Your PRAN (Permanent Retirement Account Number) remains the same throughout your life regardless of employment changes. If you change jobs: (1) Simply inform your new employer of your existing PRAN to continue corporate NPS contributions. (2) Your accumulated corpus and returns remain intact. (3) No need to open a new account or transfer funds. If you become unemployed or self-employed: (1) Continue contributing to the same account individually through eNPS, netbanking, UPI, or POP-SP. (2) You can reduce contribution amount or temporarily pause (but maintain minimum ₹6,000 annually to keep account active). (3) If you don't contribute for continuous 4 years, account becomes frozen but corpus remains invested and continues earning returns. This portability makes NPS ideal for modern careers with multiple job changes.

NPS is one of the safest long-term investments in India. Security measures include: (1) Government Regulation: PFRDA (Pension Fund Regulatory and Development Authority) strictly regulates all fund managers, custodians, and intermediaries. (2) Separation of Assets: Your NPS corpus is held by NSDL/KCPL as Central Recordkeeping Agencies, separate from fund managers. Even if a fund manager fails, your money is safe. (3) Professional Fund Managers: Only well-established fund houses with proven track records are appointed. (4) Diversification: Investments are spread across equity markets, corporate bonds, and government securities. (5) Transparent Tracking: You can monitor your portfolio daily through the NPS portal. (6) Nominee Protection: In case of death, nominee receives the entire corpus (100% withdrawal allowed, no annuity mandatory). However, NPS investments are market-linked, so corpus value can fluctuate—this is investment risk, not safety risk. Government doesn't guarantee returns, unlike PPF or EPF.