About the NPS Calculations Used in This Tool
Under the National Pension System (NPS) for Central/State Government employees, the employee contributes 10% of (Basic + DA) every month, and the Government contributes 14% of (Basic + DA) to the employee’s NPS Tier-1 account.
The Tier-1 account has a lock-in until retirement (age 60). Partial withdrawals are allowed under specific rules. Returns are market-linked and depend on your fund manager.
The Expected Annual Return (%) field lets you test future growth rates for realistic planning.
At retirement, at least 40% of the corpus must be used to buy an annuity; the remaining can be withdrawn as a lump sum (currently exempt from tax). An annuity provides fixed monthly pension income post-retirement.
What is an Annuity? An annuity is a product you buy at retirement that pays a fixed monthly pension. The pension depends on the annuity purchase amount, the annuity interest rate, and the plan chosen (e.g., lifetime, with/without return of purchase price, spouse pension, etc.).
Example Calculation
If Basic Pay = ₹50,000 and DA = 50% → Basic + DA = ₹75,000 → Employee NPS: ₹7,500/month; Employer NPS: ₹10,500/month; Total: ₹18,000/month.