NPS or National Pension System is a government-backed retirement savings scheme that helps you build a pension corpus during your working years. Unlike PPF or EPF, NPS gives you the freedom to choose how your money is invested across different asset classes - equity, debt, government securities, and alternative investments. This flexibility, combined with tax benefits under Section 80C and 80CCD, makes NPS attractive for long-term retirement planning.
For FY 2025-26, NPS offers multiple tax benefits: Contribution up to ₹1.5 lakh qualifies for Section 80C deduction, additional ₹50,000 contribution gets Section 80CCD(1B) deduction (total ₹2 lakh), and employer's contribution up to 10% of salary is also tax-free. The accumulation phase (when you're contributing) can fetch returns of 10-12% annually depending on your asset allocation. At retirement (58 years), you must use 40% of corpus to buy annuity (monthly pension for life), while 60% can be withdrawn tax-free.
Our NPS calculator helps you plan your retirement by showing how much corpus you'll build based on monthly contributions and expected returns. For example, if you're 30 years old and invest ₹5,000 per month till 58, you can potentially build ₹1 crore corpus assuming 10% returns. Combine NPS with other investments like PPF and SIP to create a comprehensive retirement plan. The partial withdrawal feature allows you to take out money for emergencies or specific goals before retirement.
NPS has two tiers - Tier 1 (locked until 58, with some withdrawal allowed after 10 years) and Tier 2 (voluntary savings, can withdraw anytime). For most people, Tier 1 makes sense because of tax benefits and forced discipline. You can open NPS account with banks, online platforms, or directly with PFRDA. Minimum contribution is ₹1,000 per year, and there's no maximum limit - you can contribute more for higher corpus and tax savings.
For detailed NPS rules, withdrawal conditions, and annuity options, check the PFRDA website at NPS Trust website which explains contribution limits, asset allocation options, and retirement corpus withdrawal rules.
Specify the amount you want to invest monthly (minimum ₹500)
Enter your expected annual return rate (historical average: 8-12%)
Specify your current age and planned retirement age
Click calculate to see your potential returns and pension estimate
Pro Tip
NPS offers dual tax benefits under Section 80C and 80CCD(1B). Start early and invest consistently to maximize your retirement corpus and tax savings.
National Pension System (NPS) is a voluntary, long-term retirement savings scheme designed to enable systematic savings. It offers market-linked returns with tax benefits and is regulated by PFRDA.
NPS is best suited for individuals who want disciplined, long-term retirement savings with tax efficiency and partial exposure to equity markets. Salaried employees, self-employed professionals, and high-income earners often use NPS to supplement EPF, PPF, or mutual fund investments.
However, NPS may not be ideal if you need high liquidity, short-term access to funds, or complete control over withdrawals. Since a portion of the corpus must be converted into a pension, investors should be comfortable with the retirement structure.
Many experienced planners treat NPS as a retirement-only product rather than a general investment tool.
NPS works best when asset allocation is aligned with age, contribution levels are consistent, and expectations about withdrawals are realistic.
NPS should ideally be one part of a broader retirement strategy. While it provides tax benefits and long-term compounding, it is not designed to meet short-term or emergency needs.
Investors often combine NPS with PPF for stability, equity mutual funds for growth, and other instruments for liquidity. This diversification helps balance risk, returns, and access to funds.
When planned correctly, NPS can significantly improve retirement income certainty without overexposing the portfolio to risk.
Tier I is a mandatory retirement account with tax benefits and withdrawal restrictions. Tier II is a voluntary savings account with no withdrawal restrictions but no tax benefits. You need a Tier I account to open a Tier II account.
NPS offers dual tax benefits: Section 80C deduction up to ₹1.5 lakhs and additional Section 80CCD(1B) deduction up to ₹50,000. At retirement, 60% of the corpus is tax-free, and 40% can be withdrawn as lump sum.
Yes, you can change your investment allocation twice in a financial year. You can switch between Auto and Active choice, change fund managers, or modify asset allocation percentages.
If you stop contributing, your account remains active and continues to earn returns. However, you need to maintain a minimum balance of ₹1,000 in your Tier I account to keep it active.
Partial withdrawals are allowed from Tier I account after 3 years for specific purposes like education, marriage, medical treatment, or house purchase, subject to certain conditions and limits.
You can join NPS between the ages of 18 and 65 years. There's no maximum age limit for contributions, but you must start receiving pension by age 70.
At retirement, 60% of your NPS corpus is used to purchase an annuity (pension). The pension amount depends on the annuity rate offered by the insurance company and your corpus size.
No, you can have only one NPS account. However, you can have both Tier I and Tier II accounts under the same PRAN (Permanent Retirement Account Number).
You need identity proof (Aadhaar, PAN, Voter ID), address proof, and passport-size photographs. You also need to fill out the NPS account opening form and provide bank account details.
No. NPS returns are market linked and depend on asset allocation. However, the investment framework is regulated, and long-term historical returns have been relatively stable.
Yes. NPS allows flexible contributions. You can change the amount or frequency as long as the yearly minimum contribution requirement is met.
Yes. NPS is widely used by self-employed individuals because it provides structured retirement savings along with additional tax deductions.
In case of death, the entire NPS corpus is paid to the nominee or legal heir. There is no requirement to purchase an annuity.