NPS Calculator

The National Pension System is not really an investment account — it is an investment account with a rule attached at the end, and the rule is what most calculators skip. At 60 you cannot simply take the money. At least 40% of whatever you have built must be used to buy an annuity, which is what pays you a monthly pension for the rest of your life. The remaining 60% you can withdraw. So the number that matters is not the corpus, it is the pension, and this works out both from what you put in each month.

How to use it

1. Enter what you contribute each month, your age now, and the age you plan to exit at.
2. Set the return you expect. NPS funds hold a mix of equity, corporate bonds and government securities, so the long-run figure sits between a fixed deposit and a pure equity fund.
3. Choose how much of the corpus goes into the annuity. Forty per cent is the legal minimum; putting in more raises the pension and shrinks the lump sum.
4. Set the annuity rate — what the pension provider will pay each year on the amount used to buy it.

Examples

• 5,000 a month from 30 to 60 at 10% builds about 1.14 crore: roughly 68 lakh as a lump sum and about 22,800 a month for life
• The same contribution with the whole corpus annuitised pays a much larger pension, but leaves nothing to withdraw

Frequently asked questions

How much of my NPS corpus can I withdraw at 60?

Up to 60%. The other 40% has to buy an annuity — that is not a suggestion, it is the exit rule for a Tier I account, and it is the single biggest difference between NPS and any ordinary mutual fund. You can choose to put more than 40% into the annuity if you want a larger pension, which is why this calculator lets you set the share rather than fixing it. There is a separate provision allowing the whole corpus to be withdrawn when it is small enough, and that threshold has been revised more than once, so check the current figure with your provider rather than assuming.

What return should I assume for NPS?

Lower than you would assume for a pure equity fund, because an NPS account is not one. Contributions are split across equity, corporate debt and government securities, and the equity share is capped and usually tapers automatically as you approach 60. Ten per cent is a common planning assumption for a moderately aggressive allocation over a long period. It is an assumption, not a promise: the fund managers publish actual returns, and a figure covering the last three years tells you far less about the next thirty than people think.

Is the NPS lump sum taxable?

The lump sum withdrawn at 60 has been exempt from income tax, and the amount used to buy the annuity is not taxed at the point of purchase. The pension you then receive is taxable as income in the year you receive it — so the tax does not disappear, it moves to later and is charged at whatever your slab is in retirement. Tax rules change, and they change more often than pension plans do. Treat this as orientation and confirm the current position before you make a decision that depends on it.

Why is the pension only an estimate?

Because nobody can quote you an annuity rate thirty years in advance. When you exit, you buy the annuity from a provider at whatever rate is on offer that week, and that rate depends on interest rates at the time, your age, and which annuity variant you pick — a plain lifetime pension pays more than one that continues to a spouse or returns the purchase price to your heirs. The corpus this calculator works out is arithmetic. The pension is arithmetic multiplied by a guess about the future, and it is labelled that way on purpose.