What NPS is, in one paragraph
NPS is a market-linked, government-regulated retirement account. You (and often your employer) contribute monthly into a Tier 1 account, invested across equity, corporate bond, and government bond funds — unlike EPF, there's no single declared interest rate, so your return depends on the funds and allocation you choose. In exchange for the market exposure, NPS carries some of the lowest fund-management charges of any retail investment product in India, and gives you tax deductions EPF and PPF don't: 80CCD(1B)'s extra ₹50,000, and 80CCD(2)'s employer-contribution deduction, which is the only retirement deduction that survives the new tax regime.
Three sections, three different rules — 80CCD(1), 80CCD(1B), 80CCD(2)
80CCD(1) is your own contribution, deductible up to 10% of Basic+DA — but it sits inside the overall ₹1.5L Section 80C ceiling, shared with EPF, ELSS, life insurance, and everything else you claim under 80C. 80CCD(1B) is a genuinely separate ₹50,000/year allowance, on top of 80C — this is the one reason to voluntarily add money to NPS beyond your employer's contribution. 80CCD(2) is your employer's contribution, and it's structurally different from the other two: it's excluded from your taxable salary before the calculation even starts, so it isn't really a "deduction" you claim — it's compensation that was never taxed. Only 80CCD(2) is available under the new tax regime; 80CCD(1) and 80CCD(1B) require you to stay on the old regime.
The employer-contribution cap most people get wrong
80CCD(2)'s deduction is capped at a percentage of Basic+DA, and that percentage depends on your sector and your regime. Government employees get 14% under either regime. Non-government (private sector) employees got a raise here too: 14% under the new regime (up from 10%, effective FY 2025-26 via Budget 2024), but the old regime cap for private-sector employees is still 10%. If your employer contributes more than your applicable cap, the excess isn't illegal — it's just not deductible.
The withdrawal rules changed in December 2025 — here's what's actually current
If you've read an NPS explainer from before December 2025, its exit rules are out of date. The old "60% lump sum, 40% mandatory annuity" rule that applied to everyone has been replaced by a table tiered by corpus size, via the PFRDA (Exits and Withdrawals) Amendment Regulations, 2025 (notified 12 December 2025, in force from publication):
| Corpus at exit (non-government) | Lump sum | Mandatory annuity |
|---|---|---|
| ≤ ₹8 lakh | Up to 100% | None |
| ₹8L – ₹12L | Up to ₹6L flat | Balance |
| > ₹12 lakh | Up to 80% | At least 20% |
Government-sector subscribers get the same ≤₹8L and ₹8–12L relief bands, but above ₹12 lakh the older 60% lump sum / 40% mandatory annuity split still applies to them. This calculator models both tables and switches automatically based on the sector toggle in the sidebar.
The catch nobody's calculator seems to model: the tax law didn't move with it
This is the single most important thing to understand before you plan around the new 80% figure. Section 10(12A) of the Income-tax Act — the section that actually makes NPS withdrawals tax-free — still exempts only 60% of your corpus. PFRDA raised how much you're allowed to withdraw as a lump sum; it did not, and cannot, change how much of that withdrawal is tax-free — that's the Income-tax Act's job, and as of this writing it hasn't been amended to match. So if you're a non-government subscriber with a corpus above ₹12 lakh and you take the full 80% lump sum, the slice between 60% and 80% of your corpus is taxed at your slab rate, same as any other income. This calculator applies that split literally — the "tax-free" and "taxable" rows in the withdrawal breakdown reflect it — instead of quietly assuming the whole lump sum is tax-free the way a calculator built before December 2025 would.
What the annuity actually is, and what it isn't
The portion you're required to annuitize doesn't stay in the NPS system — it's used to buy an annuity from an insurance provider empanelled by PFRDA, who then pays you a monthly pension for life (or for however long the annuity option you picked runs). The rate that annuity pays is set by the insurer, not by NPS's own investment performance, which is why this calculator treats "expected return" (the NPS accumulation-phase assumption) and "annuity rate" (what the insurer pays you) as two separate, both user-adjustable inputs — conflating them would misstate your eventual pension. And unlike the lump sum, the monthly pension itself is fully taxable at your slab rate every year you receive it — it never gets NPS's tax-advantaged treatment.
Why this calculator uses a flat return instead of NPS's real glide path
Under NPS's default Auto Choice, your equity allocation is capped at 75% and glides down as you age — a genuinely more realistic model than a single flat percentage. This calculator deliberately doesn't build that glide path; it uses one flat, adjustable annual return (default 10%) for the whole accumulation period, the same simplification the EPF calculator makes for its own return assumption. Treat the number here as a planning anchor, and revisit it as your actual fund performance and allocation choices become clearer over time.
Limitations of this calculator
This models Tier 1 normal exit at or after 60 only. It does not model Tier 2 (a separate, no-lock-in account with no tax benefit), premature exit before 60 or before 15 years of subscription, exit on death or disability, NPS-Lite/Swavalamban, or in-service partial withdrawals (up to 25% of your own contributions, allowed up to four times before 60 under the current rules). It also doesn't attempt to tax your future monthly pension — that depends on your total income and slab in a year that hasn't happened yet, so the pension figure shown is gross, not post-tax.
Related tools on In-Hand
- EPF calculator for your provident fund balance and growth.
- EPF vs NPS calculator to compare projected corpus from each.
- EPF + NPS combined calculator for an integrated corpus estimate.
- Retirement planner — NPS, EPF, equity, debt, and PPF combined, with Monte Carlo probability-of-success modeling.
- FIRE calculator if you're planning to retire well before 60 — NPS's own exit age.
- NSC calculator for a fixed, guaranteed-return 80C alternative to NPS's market-linked one.
- CTC to in-hand salary calculator to work out your Basic+DA and monthly take-home first.