Retirement & Pensions
NPS calculation: lump sum, annuity & pension rules
At age 60, up to 60% of the NPS corpus can be withdrawn as a tax-free lump sum, while at least 40% must be used to buy a life annuity.
The 60:40 withdrawal rule
Under PFRDA regulations, when an NPS subscriber reaches 60 years of age, a minimum of 40% of the accumulated corpus must be invested in an annuity scheme from an authorised life insurer, generating a regular monthly pension. Up to 60% can be withdrawn as a 100% tax-free lump sum.
Asset allocation and growth
NPS allows you to invest across Equity (E), Corporate Bonds (C), Government Securities (G), and Alternative Assets (A). Subscribers can choose Active Choice (setting custom weights up to 75% equity) or Auto Choice (lifecycle funds that automatically derisk as you age).
Exclusive Section 80CCD(1B) tax benefit
In addition to the standard ₹1.5 Lakh ceiling under Section 80C, individual NPS Tier-1 contributors receive an exclusive extra tax deduction of up to ₹50,000 under Section 80CCD(1B) under the Old Tax Regime.
How to check an NPS retirement projection
Multiply your monthly contribution by the total number of months until age 60 to verify total principal invested. At a 10% expected return, compounding generates the majority of your corpus in the final 10 years. Split the corpus into minimum 40% annuity and up to 60% lump sum.
This guide is for general education. Rules, lender terms, bank terms and individual circumstances can change the result.
Use the relevant calculatorFrequently asked questions
Is NPS corpus fully tax-free at retirement?
Up to 60% of the corpus can be withdrawn as a tax-free lump sum at age 60; the remaining 40% must be used to purchase an annuity, and monthly annuity pension is taxable as per your slab.
Can I exit NPS before age 60?
Premature exit is permitted after 5 years, but at least 80% of the corpus must be annuitised.