NPS Calculator

How the NPS Corpus Is Built

NPS works like a monthly SIP into a market-linked pension account: each contribution earns returns for the remaining time until retirement, so a rupee put in at age 30 has far longer to compound than one put in at age 55. Actual returns depend on which asset allocation you choose across equity, corporate bonds, and government securities — the calculator above uses a single assumed annual return you enter, applied consistently across the full tenure, so treat it as a projection based on your own assumption, not a promised outcome.

At retirement (age 60), NPS rules require at least 40% of the accumulated corpus to be used to purchase an annuity, which pays you a regular pension. The remaining portion can be withdrawn as a lump sum.

Worked Example

A ₹5,000 monthly contribution starting at age 30, assuming a 10% p.a. return until retirement at 60 (360 months):

Long tenures are where NPS's compounding does most of the work — in this example, returns account for over 5 times the amount actually contributed. The 40% annuity portion itself doesn't pay out as a lump sum; it buys an annuity plan that pays you a periodic pension for life.

Tax Treatment

NPS offers an additional deduction (commonly cited as up to ₹50,000, over and above the standard 80C-style limit) for contributions to your Tier-I account — but this additional deduction is available only if you opt for the old tax regime; the new tax regime doesn't allow it. Which regime results in lower tax overall depends on your full income and deduction profile, so this is worth checking each year rather than assuming.

At maturity, the lump-sum portion is tax-exempt, and the annuity income you receive later is taxed as regular income in the year you receive it, at your slab rate at that time.

Exiting Before Retirement

NPS is designed to be a long-term retirement account and restricts early access. Partial withdrawal is permitted only for specific purposes (such as higher education, home purchase, or medical treatment) and is capped as a percentage of your own contributions. Exiting the scheme entirely before retirement age is allowed only after a minimum holding period, and a large majority of the corpus must still go toward an annuity rather than being paid out as cash. Confirm the current withdrawal rules with your NPS point of presence before planning around an early exit.

Tier I vs Tier II Accounts

NPS is structured around two linked accounts. Tier I is the primary retirement account — this is the one the calculator above models, the one that carries the lock-in until retirement age, and the one that qualifies for the 80CCD(1) and 80CCD(1B) deductions described below. You cannot open a Tier II account without first having an active Tier I account.

Tier II is a voluntary add-on account that behaves more like a flexible investment account: there is no lock-in, and you can withdraw from it at any time without the restrictions that apply to Tier I. The trade-off is that Tier II contributions generally don't carry the same tax deduction benefits available on Tier I for private-sector subscribers — government employees have historically had some separate provisions for Tier II under specific conditions. Because eligibility rules for Tier II tax treatment can vary by employment category and have changed over time, confirm your specific eligibility before contributing to Tier II with a tax deduction in mind.

Choosing Your Asset Allocation

Within Tier I, your contributions are invested across three fund categories: Equity (E), Corporate Bonds (C), and Government Securities (G). How much goes into each is up to you, within limits set by the regulator. NPS offers two broad ways to set this split.

Under "Active Choice," you decide the percentage allocated to each fund category yourself, subject to a regulatory cap on how much can go into equity — this gives you direct control but also means you carry the responsibility of rebalancing as your goals or risk appetite change. Under "Auto Choice," the allocation follows a pre-set lifecycle pattern: a larger share sits in equity when you're younger, and the mix automatically shifts toward corporate bonds and government securities as you approach retirement age, reducing exposure to market swings later in your working life. Several lifecycle variants exist within Auto Choice, differing mainly in how aggressively they hold equity at younger ages.

Neither option changes the underlying reality that NPS returns are market-linked — Active Choice simply hands you more control over how much market exposure you carry, while Auto Choice manages that exposure for you on a schedule tied to age rather than market conditions.

NPS vs PPF vs EPF

All three are commonly used for long-term retirement savings, but they differ in ways that matter for planning — particularly in how the return is determined and how withdrawals are taxed.

The practical distinction worth sitting with: PPF's rate is set by the government and doesn't move with markets, which is why it's described as fixed-rate and government-backed in the return sense. NPS is different in kind — the account framework is regulated by PFRDA, but what you actually earn depends on how your chosen equity, corporate bond, and government securities funds perform, so it cannot accurately be called fixed-rate or government-backed for the return itself. Neither structure is inherently better; they simply carry different trade-offs between predictability and long-term growth potential.

Who Can Open an NPS Account

NPS is open to any Indian citizen (resident or NRI, subject to conditions) between 18 and 70 years of age, whether salaried or self-employed. Government employees in many categories are enrolled into NPS by default as part of their service conditions, while private-sector employees and self-employed individuals join voluntarily. This broad eligibility is one reason NPS is often positioned alongside PPF as an option for the self-employed and business owners who don't have access to an employer-linked scheme like EPF.

Opening an account requires a PRAN (Permanent Retirement Account Number), which you can apply for online through the eNPS portal or through a bank or other point of presence acting as an NPS intermediary. Once issued, the same PRAN stays with you across employers and locations for life, similar in spirit to how a UAN follows you across EPF employers.

There's also a separate corporate NPS model, where an employer sets up NPS contributions on behalf of employees, sometimes alongside its own matching contribution. Where this exists, the employer's contribution can carry its own deduction treatment distinct from the individual 80CCD(1B) benefit described above, so a salaried employee with access to corporate NPS should check with their employer or payroll team on exactly how the two interact rather than assuming the individual rules described in this guide cover the employer-contribution portion too. Whether you join through a corporate arrangement or open an account individually via eNPS, the underlying Tier I structure, lock-in, and annuity requirement at retirement stay the same. What can differ is who bears the cost of the annual account maintenance and fund management charges, and whether the employer makes a matching or additional contribution on top of what you put in yourself — details worth confirming with your employer's HR or payroll team if NPS is offered through work.