NPS (National Pension System) is India's government-backed retirement savings scheme with significant tax benefits. These scenarios show how different monthly contributions build retirement wealth from different start ages.

Each scenario assumes a 10% blended annual return - a reasonable long-term average for the moderate (LC50) lifecycle fund - with monthly contributions made until age 60. The compounding period varies by start age: 35 years if you start at 25, 30 years from age 30, 25 years from 35, and just 20 years from 40. Because compounding rewards time disproportionately, starting early matters more than contributing more later.

How to use these scenarios: find the (contribution, age) combination closest to your situation, then read across to see the corpus at age 60. Note that 60% of this corpus is paid as a tax-free lump sum and 40% must purchase a life annuity - the FAQ below explains the split in detail.

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Frequently Asked Questions

What return rate do these NPS scenarios assume?

Most scenarios assume a 10% blended annual return - a reasonable long-term average for the moderate Auto Choice (LC50) lifecycle fund, which gradually shifts equity exposure from 50% in your 30s to 10% by retirement. Pure equity (Active Choice with 75% equity until 50) historically returned 11–12%; conservative LC25 returned 8–9%. Pick a scenario that matches your risk profile.

How is the NPS corpus paid out at retirement?

At age 60, you can withdraw up to 60% as a tax-free lump sum, and the remaining 40% must buy an annuity from an empanelled insurer. The annuity provides monthly pension for life and is taxable as regular income. The corpus figures shown here are the total accumulation - your in-hand lump sum is roughly 60% of that, with the rest converting into a pension stream.

What tax benefits does NPS provide?

Three layers in the old regime: (1) Section 80CCD(1) up to ₹1.5 lakh as part of the 80C limit, (2) Section 80CCD(1B) an additional ₹50,000 exclusively for NPS, and (3) Section 80CCD(2) employer contribution up to 14% of basic salary - this third one is also available in the new tax regime. The 80CCD(1B) ₹50,000 is unique to NPS and the only deduction not available elsewhere.

Why does start age matter so much?

Compounding compounds. Starting ₹5,000/month at age 25 builds ~₹1.91 crore by 60; the same ₹5,000/month started at 40 builds only ~₹38 lakh - a 5x gap from a 15-year delay. Each decade delay roughly halves your final corpus at the same contribution. If you can start NPS at any point in your 20s or early 30s, do it; the additional 80CCD(1B) deduction alone makes it worth opening.

Want to Calculate with Your Own Numbers?

Every scenario uses standard assumptions. Use the calculator to input your exact figures.

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