What is NPS?
The National Pension System (NPS) is a government-regulated retirement scheme run by the Pension Fund Regulatory and Development Authority (PFRDA). You invest regularly during your working life in a mix of equity, corporate bonds and government bonds. At retirement, part of the corpus is paid out as a lump sum and the rest buys an annuity that pays a monthly pension for life.
New exit rules (from December 2025)
| Corpus at exit | What you can do (non-government subscribers) |
|---|---|
| Up to ₹8 lakh | Withdraw the full amount, or take systematic withdrawals |
| ₹8 lakh – ₹12 lakh | Up to ₹6 lakh as lump sum; the rest in systematic withdrawals or an annuity |
| Above ₹12 lakh | Up to 80% as lump sum; at least 20% buys an annuity |
Government employees follow separate rules. Check the latest PFRDA circulars before you exit.
How the calculator works
- Your monthly contributions grow at the expected return until retirement.
- The chosen share of the corpus buys an annuity; the rest is your lump sum.
- The monthly pension = annuity amount × annuity rate ÷ 12.
Worked examples (10% return, retiring at 60, 40% annuity at 6%)
| Monthly investment | Start age | Corpus | Lump sum | Monthly pension |
|---|---|---|---|---|
| ₹5,000 | 30 | ₹1.04 crore | ₹62.4 lakh | ₹20,793 |
| ₹10,000 | 30 | ₹2.08 crore | ₹1.25 crore | ₹41,586 |
| ₹5,000 | 40 | ₹36.2 lakh | ₹21.7 lakh | ₹7,240 |
Starting at 30 instead of 40 with the same ₹5,000 a month nearly triples the corpus. With the minimum 20% annuity instead of 40%, the first example gives a lump sum of about ₹83.2 lakh and a pension of about ₹10,396 a month.
Things to keep in mind
- Annuity rates are set by insurers when you retire, commonly 5–7% today, and pensions are taxable. For the lump sum, an SWP can provide a more tax-efficient monthly income.
- Inflation erodes a fixed pension over time. Check future costs with the inflation calculator.
- Combine NPS with EPF, PPF and a SIP for a balanced retirement plan.
Frequently asked questions
How much can I withdraw from NPS at retirement?
Under rules introduced by PFRDA in December 2025, non-government subscribers can withdraw up to 80% of the corpus as a lump sum and must use at least 20% to buy an annuity. If the corpus is ₹8 lakh or less, the whole amount can be withdrawn.
Is the NPS lump sum tax-free?
Up to 60% of the corpus can be withdrawn tax-free. Any lump sum above that is taxed at your slab rate. The pension (annuity income) is taxed as income every year.
What return does NPS give?
NPS returns depend on the asset mix you choose. Equity-heavy schemes have historically earned around 9–12% a year over long periods, while government-bond and corporate-bond schemes earn less but are more stable. Returns are not guaranteed.
What tax benefits does NPS offer?
Under the old tax regime, your contributions qualify for a deduction of up to ₹1.5 lakh (with 80C) plus an extra ₹50,000 under 80CCD(1B). Your employer’s contribution is deductible in both regimes: up to 14% of basic pay in the new regime, and up to 10% in the old regime for private-sector employers.
When can I exit NPS?
Non-government subscribers can exit at 60, on retirement, or after 15 years of subscription, whichever is earlier. The corpus can be kept invested until 85.
Sources
Last updated 19 September 2026. Results are estimates for planning only and are not investment, tax or legal advice. See our disclaimer.