NPS Calculator: The National Pension System (NPS) enables private sector employees to plan for their retirement. Starting investments early in NPS can significantly benefit your retirement planning by building a substantial retirement fund and ensuring a good monthly pension.

While NPS investments do not guarantee a fixed pension, starting early and investing wisely can provide assurance of a financially comfortable retirement. The pension amount depends on the chosen annuity scheme and the returns earned over the investment period.

Also read: NPS Calculator: How much should you invest to get Rs 1 lakh pension per month?

NPS Calculator – Rs 10,000 investment monthly for 35 years

Here we will see using the NPS Calculator how investing Rs 10,000 monthly at 25 years old could grow your retirement corpus over 60 years and give you a reasonable monthly pension.

Suppose you are currently 25 years old and you begin investing Rs 10,000 monthly in NPS. Assuming you plan to retire at age 60, you have 35 years of investment ahead of you.

Using the SBI Pension Fund’s NPS Calculator, let’s find out the estimated retirement fund and monthly pension.

Monthly investment under NPS: Rs 10,000

Total contribution in 35 years: Rs 42 lakh

Estimated return on investment: 10%

Total amount on maturity: Rs 3.75 crore

Annuity purchase: 40% (Rs 1.5 crore)

Estimated annuity rate: 6%

Pension at age 60: Approx. Rs 75000 per month

So if you purchase an annuity with 40% of the maturity amount and get an annuity rate of 6%, you will get a pension of Rs 74,958 per month at the age 60. As you are buying an annuity with 40% maturity amount, you will get around Rs 2.25 crore as lump sum.

Also read: OPS-like guaranteed pension in NPS: Central govt employees may get 50% of last-drawn salary as pension – Details

NPS rule on Annuity scheme

The rule says at least 40% of your accumulated NPS corpus must go towards buying an annuity from an Annuity Service Provider (ASP) regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The remaining 60% of the corpus can be withdrawn tax-free as a lump sum.

Under NPS, there are two types of accounts – Tier 1 and Tier 2. Tier 1 works as a pension account and Tier 2 serves as a voluntary savings account. To open a Tier 2 account, you should have an existing Tier 1 account. Tax exemptions on contributions are for Tier 1 accounts only.

Under NPS, tax exemptions can be claimed up to Rs 50,000 under Section 80CCD (1B) of the Income Tax Act, in addition to the Rs 1.5 lakh limit under Section 80C. Also, your 60% of the maturity amount from NPS will be tax-free on withdrawal.