NPS Calculator

What is NPS?

The National Pension System (NPS) is a government-backed retirement savings scheme designed to help you build a secure financial future. By investing regularly during your working years, you can create a sizeable corpus and enjoy a steady pension after retirement, giving you long-term financial stability and peace of mind.

NPS offers flexible investment choices, low costs, and attractive tax benefits under the Income Tax Act, 1961. Whether you are a salaried employee, self-employed professional, or a corporate employee, NPS helps you plan for a comfortable, worry-free retired life.

Eligibility for NPS

The National Pension System (NPS) is open to all Indian citizens and offers different models depending on the subscriber category.

NPS for Government Employees

• Central Government Employees: All central government employees who joined service on or after 1 January 2004 (except armed forces personnel) are mandatorily covered under NPS.
• Central Autonomous Bodies: Employees of central autonomous organizations may also be covered under NPS from the notified date.
• State Government Employees: NPS is available to employees of State Governments or State Autonomous Bodies if the respective state has adopted NPS for its workforce.

NPS for Corporate Employees

• Corporate Adoption: Companies can voluntarily adopt NPS for their employees as part of their retirement benefit structure.
• Employer Contributions: Employers can contribute to the NPS account of employees, providing a tax-efficient and structured way to support their retirement planning.

NPS for Citizens (All Individuals)

• Open to All: Any Indian citizen, resident or non-resident, can join NPS.
• Age Eligibility: Individuals aged between 18 and 70 years can open an NPS account, subject to KYC norms.
• Flexible Investing: Subscribers can invest systematically over time to create a strong retirement corpus.

Types of NPS Accounts

NPS is divided into two tiers, each serving a different purpose for investors:

Tier-I Account – Core Pension Account

• This is your main, mandatory pension account.
• Designed for long-term retirement savings.
• Withdrawals are restricted and governed by NPS exit rules.
• Minimum contribution and yearly contribution rules apply.

Tier-II Account – Flexible Savings Account

• Optional account that can be opened only if you have an active Tier-I.
• Works like a voluntary savings account linked to NPS.
• Withdrawals are free and allowed anytime, offering high liquidity.

NPS Asset Classes (Where Your Money Is Invested)

When you invest in NPS, your money is allocated across different asset classes. Think of them as different “boxes” where your savings are kept:

E – Equity (Shares)

• Your money is invested in company shares.
• High return potential but comes with market risk.
• You can invest up to 75% (Tier-I) or 100% (Tier-II) in equity, as per rules.

C – Corporate Debt

• Your money is lent to companies via bonds and debentures.
• Generally safer than pure equity and offers steady interest income.

G – Government Bonds

• Money is invested in Government securities and bonds.
• Very safe but usually offers relatively lower returns.

A – Alternative Investments

• Money is invested in alternative assets such as REITs, InvITs, etc.
• Higher risk and limited allocation (up to 5% of the portfolio).

Note: The total allocation across E, C, G, and A must always add up to 100%. You can either let NPS manage it automatically via Auto Choice (life-cycle based) or choose your own mix using Active Choice.

Tip: If you are young, you can allocate more towards Equity (E) for growth. As you get closer to retirement, you may shift towards safer options like Corporate Debt (C) and Government Bonds (G).

Key Benefits of NPS

1. Tax-Efficient Retirement Planning

When you open an NPS account, you receive a 12-digit Permanent Retirement Account Number (PRAN) that stays with you for life. NPS investments are eligible for attractive tax deductions under sections 80CCD(1), 80CCD(1B), and 80CCD(2) of the Income Tax Act, 1961, helping you reduce your taxable income.

2. Flexible Investment Choices

With NPS, you can choose how your money is invested across Equity, Corporate Debt, Government Bonds, and Alternative Assets. You can also change your Pension Fund Manager or switch schemes (E, C, G, A or life-cycle options) if your risk profile or financial goals change over time.

3. Portability Across Jobs and Locations

NPS is fully portable across jobs, sectors, and locations. Even if you change your employer or move to another city, your PRAN and NPS account remain the same. You can continue with the same scheme or switch to a different one as per your choice.

4. Low Cost with Power of Compounding

NPS is one of the lowest-cost pension products in India. Fund management charges are very low compared to many mutual funds and insurance-based products. This ensures that more of your money stays invested and compounds over time, helping you build a larger retirement corpus.

5. Convenient Online Access

You can open your NPS account online, contribute digitally, view statements, change schemes, manage your Tier-II account, and track performance anytime. This makes NPS easy to manage, even for busy professionals.

Charges for Handling Your NPS Account

NPS is designed to be transparent and low-cost. Some typical charges include:

• Account Opening: A small one-time fee (around ₹15–₹40) depending on whether you opt for a physical PRAN card or e-PRAN.
• Annual Maintenance: A yearly fee (approximately ₹14–₹69) to keep your account active.
• Transaction Charges: Nominal charges per contribution or transaction; many online contributions through eNPS are very low-cost or free.
• Other Services: Small charges (1–2 rupees) for services like instant bank verification.
• Contribution Fees: A small percentage (for example, around 0.5%) of the contribution amount, usually capped at a maximum limit.
• Exit/Withdrawal: A small processing fee may apply at the time of exit, capped at a reasonable amount (e.g., up to ₹500).
• Investment Management Fee: Pension funds charge a very small annual fee (for example, around 0.03%–0.09%) of your Managed Assets.
• Payment Channel Charges: Certain payment modes like credit cards may have extra charges, while UPI, debit cards, or net banking may be free or very low-cost.

Key idea: The overall cost of NPS is very low and transparent, so more of your money remains invested and grows for your retirement.

Tax Benefits Under NPS

Tax Benefits for Employees on Own Contributions

• Deduction up to 10% of salary (Basic + DA) under section 80CCD(1), within the overall limit of ₹1.5 lakh under section 80CCE.
• Additional deduction of up to ₹50,000 under section 80CCD(1B), over and above the ₹1.5 lakh limit.

Tax Benefits on Employer’s Contribution

• Employer’s contribution up to 10% of salary (Basic + DA) is deductible under section 80CCD(2).
• For Central Government employees, the contribution limit can go up to 14% of salary.

Tax Benefits for Self-Employed Individuals

• Deduction up to 20% of gross income under section 80CCD(1), within the overall limit of ₹1.5 lakh under section 80CCE.
• Additional deduction of up to ₹50,000 under section 80CCD(1B).

Tax Benefits on Partial Withdrawals

Partial withdrawals of up to 25% of your own contributions for specified purposes are exempt from tax under section 10(12B), as per PFRDA rules.

Tax Treatment of Annuity (Pension Income)

• Amount used to purchase an annuity at retirement is generally tax-exempt under section 80CCD(5).
• However, the pension (annuity) you receive later is taxable as per your income tax slab under section 80CCD(3).

Tax Benefits on Lump-Sum Withdrawal at Retirement

At retirement or upon reaching age 60, you can withdraw up to 60% of your accumulated NPS corpus as a lump sum. This amount is exempt from tax under section 10(12A), subject to prevailing rules.

Tax Benefits for Employers (Companies)

Employers can claim the NPS contribution made for employees as a business expense up to 10% of salary (Basic + DA) under section 36(1)(iv)(a) of the Income Tax Act, 1961.

NPS Pension Calculation – Manual Example

NPS returns are market-linked, but you can estimate your future corpus using the compound interest formula:

A = P × (1 + r/n)^n×t

Where A is the maturity amount, P is the contribution, r is the annual rate of return, n is the compounding frequency, and t is the number of years.

Example Calculation

• Age at start: 30 years
• Monthly Contribution: ₹5,000
• Years of Contribution: 30 years (t = 30)
• Expected Annual Return (ROI): 9%

Approximate Results:

• Total Principal Invested: ₹18,00,000 (₹5,000 × 12 × 30)
• Maturity Corpus (approx.): ₹1.01 crore (assuming 9% annual return)

Takeaway: Consistent contributions over a long period, along with the power of compounding, can help you build a significant retirement corpus with NPS.

Manual calculations can be time-consuming and prone to error. That’s why using an online NPS calculator like Finanjo’s NPS Pension Calculator is a smarter and faster way to estimate your retirement corpus.

How to Use Finanjo’s NPS Pension Calculator – Step-by-Step

Step 1: Enter Your Details

Fill in the following inputs in the calculator in order:

1. Subscriber Sector (Mandatory)

• Government – Central/State Government or public sector employees
• Non-Government – Private sector, self-employed, or NGOs
• NPS Vatsalya – Minor Indian citizens (under 18) managed by a guardian

2. Scheme Preference (Mandatory)

Select the appropriate scheme based on your sector:

• Government Employees: CG, G100, LC25, LC50
• Non-Government: LC25, LC50, LC75, ACTIVE, CORP CG, BLC
• NPS Vatsalya: LC25, LC50, LC75, ACTIVE

Tips for choosing:

• Younger investors: LC50, LC75, or ACTIVE for higher equity allocation.
• Near retirement: LC25, CG, or G100 for capital safety.
• Balanced risk: BLC or LC50 for a mix of growth and stability.

3. Date of Birth

• Minimum age for Government/Non-Government: 18 years, maximum 75 years.
• NPS Vatsalya: For minors up to 18 years of age.

4. Desired Retirement Age

Enter the age at which you plan to retire. Minimum is 60, maximum is 75. If left blank, the calculator may assume a default of 60 years.

5. Deferment Age

This is the age at which you want to start receiving your monthly pension. It cannot be earlier than retirement age. Default may be 60 if left blank.

6. Existing NPS Tier-I Corpus

If you already have an NPS account, enter your current corpus in Tier-I. New subscribers can keep this as zero.

7. Monthly Contribution

Enter the amount you plan to invest every month from your own side towards NPS.

8. Employer Monthly Contribution (If Applicable)

If your employer contributes to your NPS account, enter the monthly employer contribution here.

9. Annual Increase in Contribution (%)

You can choose to increase your contributions every year (for example, by 5%) as your income grows. If left blank, some calculators may assume a default based on inflation or keep it constant.

10. Annual Charges (%)

Enter the expected yearly charges as a percentage so that the calculator can estimate net growth after costs.

11. Annuity Ratio (%)

This is the percentage of your total corpus that you plan to convert into a monthly pension by purchasing an annuity. For many cases, at least 40% is required at exit after age 60 as per PFRDA rules.

12. Expected Annual Rate of Return (%)

Enter the rate of return you expect from your NPS investments based on your chosen asset allocation. For example, you may assume 6.75% or higher depending on your mix of equity and debt.

13. Desired Monthly Pension

Enter the monthly pension amount you would like to receive in retirement. The calculator can then show you whether your contributions are sufficient or need to be increased.

Step 2: Click “SOLVE” to View Your Pension Projection

Once you enter all your details, click the SOLVE button. The NPS calculator will estimate:

• Your projected retirement corpus at exit
• Approximate lump-sum withdrawal (up to 60%)
• Estimated monthly pension based on the annuity ratio

Step 3: Download the Detailed Report

Click DOWNLOAD CSV to export your projections and review your year-on-year contribution and corpus growth. If you change any input, generate a fresh report for updated values.

Step 4: Reset Inputs Anytime

Use the Reset option to clear all fields and start again. This is helpful if you want to test different contribution strategies or retirement ages.