How the NPS calculation works
Your monthly contributions are invested and grow at the return you assume, compounded monthly, with the contribution rising by your chosen percentage each year. At retirement, the total (your corpus) is split into a lump sum you take out and an annuity: money paid to an insurer that sends you a pension every month for life.
Monthly pension = corpus × annuity share × annuity rate ÷ 12
Investing ₹5,000 a month from age 30, raised 5% a year, at 10% gives about ₹1.8 crore at 60. Taking 80% as a lump sum leaves ₹35.93 lakh for the annuity, which at 6% pays about ₹17,965 a month.
The new exit rules
PFRDA changed the NPS exit rules in December 2025:
- Non-government subscribers can take up to 80% as a lump sum (earlier 60%); at least 20% buys an annuity.
- If your corpus is ₹8 lakh or less, you can withdraw it all.
- Government subscribers keep the 60% lump sum and 40% annuity split, with full withdrawal allowed up to ₹5 lakh.
- You can stay invested until age 85.
Questions people ask
How much can I withdraw at 60?
Since PFRDA’s December 2025 changes, non-government subscribers can take up to 80% as a lump sum and must use at least 20% to buy an annuity (a monthly pension). Government employees can take up to 60%. If your corpus is ₹8 lakh or less (₹5 lakh for government subscribers), you can withdraw all of it.
Is the NPS lump sum tax-free?
60% of the corpus withdrawn at retirement has been tax-free. With the limit now raised to 80%, check the current tax treatment of the extra 20% with a tax professional. Annuity income is taxed as income each year.
What return should I assume?
NPS returns depend on how much you hold in equity, corporate bonds and government bonds. Long-term returns have often been in the 8–12% range, but they are not guaranteed. Try a cautious and an optimistic rate.
What tax benefit do I get for investing?
In the old regime, your own contribution counts towards 80C, and an extra ₹50,000 can be deducted under 80CCD(1B). Your employer’s contribution (up to 14% of basic in the new regime, 10% in the old) is deductible in both regimes.
Can I stay invested after 60?
Yes. You can now stay in NPS until 85 and take your money out later, or in instalments.
Method and sources
Contributions at the start of each month, compounded monthly at the assumed return, raised once a year by the step-up. Exit split per PFRDA's exit and withdrawal regulations as amended in December 2025. The pension is a level lifetime annuity without return of purchase price; other annuity types pay less. Figures are illustrations, not a forecast. How we calculate.
Last reviewed 22 Oct 2026 by the WealthFeedz team.