Project NPS Tier 1 corpus at retirement.
Corpus at age 60
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60% lump-sum (tax-free)
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40% annuity
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Worked example
Take a 30-year-old who invests Rs 10,000 a month into an NPS Tier 1 account, expecting a blended 10 percent annual return until age 60. That is 30 years, or 360 monthly contributions, with the monthly rate being 10 percent divided by 12. Treating each contribution as invested at the start of the month, the future value works out to roughly Rs 2,27,93,253. At age 60 the rules let you withdraw up to 60 percent of the corpus as a tax-free lump sum, which is about Rs 1,36,75,952. The remaining 40 percent, about Rs 91,17,301, must be used to buy an annuity that pays a pension, and that annuity income is taxable in the year you receive it.
| Step | Value |
|---|---|
| Monthly contribution | Rs 10,000 |
| Months to age 60 | 360 |
| Expected return | 10 percent per year |
| Corpus at 60 | Rs 2,27,93,253 |
| 60 percent tax-free lump sum | Rs 1,36,75,952 |
| 40 percent annuity purchase | Rs 91,17,301 |
How it is calculated
NPS is market-linked, so the corpus depends on the return your equity and debt mix actually earns. The calculator compounds the monthly contribution at one twelfth of the assumed annual return for every month until age 60, using a start-of-month timing that lets each deposit earn for the full month. At 60 the exit rules apply a fixed split: at least 40 percent of the corpus must purchase an annuity, and up to 60 percent can be taken as a lump sum that is tax-free. The annuity then pays a regular pension that is taxed as income. On the contribution side, NPS offers an extra Rs 50,000 deduction under Section 80CCD(1B) beyond the 80C limit, and employer contributions up to 10 percent of salary are deductible under 80CCD(2) with no upper cap, which makes it attractive for higher earners.