Formula used
NPS corpus = future value of monthly contribution compounded at the expected annual return until age 60. At maturity, at least 40% buys an annuity; monthly pension = annuity corpus × annuity rate / 12. The remaining 60% (or less) can be withdrawn tax-free.
Example calculation
Age 30, Rs 5,000/month, 10% return, 40% annuity at 6%: corpus at 60 = Rs 1,13,02,000. Lump-sum = Rs 67,81,000. Annuity corpus = Rs 45,21,000. Monthly pension = Rs 22,605.
How to use this calculator
- Enter your current age — corpus is estimated until age 60.
- Enter your monthly NPS Tier 1 contribution (include employer contribution if adding both).
- Set the expected annual return based on your NPS fund allocation (10% for aggressive, 7–8% for conservative).
- Set annuity purchase % — minimum 40% is mandatory; higher % means more monthly pension.
- Set the annuity rate offered by insurers (typically 5.5–7%) to estimate monthly pension.
Important assumptions
- Constant monthly contribution throughout the period — actual contributions may vary.
- Constant return rate — NPS equity allocation returns are market-linked and volatile.
- Annuity rate is an estimate; actual rates depend on the insurer and annuity type chosen at maturity.
- Employer NPS contributions (80CCD(2)) are not separately tracked — add them to monthly contribution if including both.
- Educational estimate only. Verify current NPS rules and annuity rates on the NPS Trust website.
Common mistakes to avoid
- Using the equity CAGR (10–12%) for a conservative NPS allocation with high government bond exposure.
- Forgetting that monthly pension (annuity income) is taxable at your slab rate.
- Not using the extra Rs 50,000 80CCD(1B) deduction available over and above 80C.
- Ignoring employer's 80CCD(2) NPS contribution — it is deductible without any cap for the employer.
How NPS works
The National Pension System (NPS) is a voluntary, long-term retirement savings scheme regulated by PFRDA. Contributions go into Tier 1 (retirement-locked) and optionally Tier 2 (liquid). Tier 1 funds are invested across equity (E), government securities (G) and corporate bonds (C) in the allocation you choose. At age 60, you withdraw up to 60% tax-free and must buy an annuity with at least 40% for a monthly pension.
- Tax benefits: 80CCD(1) up to Rs 1.5L + extra Rs 50,000 under 80CCD(1B).
- Employer NPS (80CCD(2)): deductible without any cap on salary percentage.
- Maturity: 60% lump-sum tax-free + 40% annuity (monthly pension, taxable).
NPS vs EPF vs PPF
EPF is automatic for organised-sector employees (12% employee + 3.67% employer to EPF). PPF is a 15-year government-backed investment with full EEE tax status. NPS is more flexible in investment choice (equity to bonds) and has the extra Rs 50,000 deduction under 80CCD(1B), but requires an annuity purchase at maturity. Many salaried investors use EPF + PPF as the safe core and NPS as an additional retirement vehicle.
- NPS: market-linked, flexible allocation, extra tax deduction, annuity required.
- EPF: auto-deducted, employer-matched, ~8.25% declared rate.
- PPF: voluntary, risk-free, full EEE, 15-year lock-in.
Source and Methodology
Corpus is computed as the future value of a constant monthly contribution compounded monthly at the entered annual rate until age 60. Lump-sum and annuity splits are applied on the total corpus. Monthly pension = annuity corpus × annuity rate / 12. All figures are pre-tax estimates.
Related calculators and guides
You can cross-check this estimate using: salary in-hand calculator, Old vs New Tax Regime Calculator, 80C deduction calculator, EMI calculator, ITR-2 filing guide, emergency fund guide.
When this tool is useful
- When you want a fast estimate before making a financial or salary decision.
- When you want to compare different assumptions in seconds.
- When you want to understand the formula behind the result.