NPS Calculator

What is NPS and Who Should Use It?

The National Pension System (NPS) is a government-regulated, market-linked retirement savings scheme open to all Indian citizens aged 18–70. Unlike PPF or EPF, NPS invests your contributions in a mix of equity, corporate bonds and government securities based on your chosen fund option. This gives it higher return potential than traditional fixed-income retirement instruments — historically 10–12% over long periods for balanced allocation. NPS is particularly compelling for its unique tax benefits that no other instrument replicates.

The Three NPS Tax Benefits — Stacked Together

NPS is the only instrument offering three stackable tax deductions. 80C (₹1.5 lakh): Your own NPS contribution is eligible — but this competes with EPF, PPF, ELSS etc. for the same limit. 80CCD(1B) (₹50,000): An additional ₹50,000 deduction exclusive to NPS — completely separate from 80C. This saves ₹15,600 in taxes for someone in the 30% bracket. 80CCD(2) (unlimited): Employer NPS contributions up to 10% of salary (14% for central government employees) are fully deductible without any cap. For someone with ₹12 lakh salary, 10% = ₹1.2 lakh in tax-free employer contribution annually. Use our Income Tax Calculator to see the combined tax savings.

NPS Withdrawal Rules — What You Can and Cannot Do

At age 60 (normal retirement): You can withdraw up to 60% of the corpus as a tax-free lump sum. The remaining minimum 40% must be used to purchase an annuity (pension). Partial withdrawal: After 3 years, you can withdraw up to 25% of your own contributions for specific purposes — higher education, marriage, medical emergency, home purchase. Maximum 3 partial withdrawals in a lifetime. Early exit before 60: If you exit before 60 and the corpus is below ₹5 lakh, full withdrawal allowed; above ₹5 lakh, minimum 80% must go to annuity. This is far more restrictive than early exit from PPF.

NPS vs PPF vs EPF — Choosing the Right Mix

The three instruments serve different purposes. EPF (if employed): automatic, employer-matched, 8.15% tax-free — keep it. PPF: guaranteed, EEE, 7.1% — the safety anchor for retirement. NPS: market-linked higher returns, unique 80CCD(1B) deduction, but annuity is mandatory and taxable. The ideal retirement portfolio uses all three: EPF as the base, PPF for safety, and NPS for the extra ₹50,000 tax deduction and higher equity growth. See our PPF Calculator and Retirement Calculator to model your complete retirement plan.

✓Verified by ToollyX Team · Last updated June 2026