NPS Explained: How the National Pension System Builds Your Retirement

The National Pension System (NPS) is a low-cost, market-linked scheme designed to build a retirement corpus and a monthly pension. You contribute during your working years, the money is invested in a mix of equity and debt, and at 60 it converts into a lump sum plus a pension.

How the corpus builds

Your monthly contributions are invested and compound until you turn 60. The longer you contribute and the higher the return, the larger the corpus — the NPS calculator projects it from your age, contribution and expected return.

What happens at 60

Under current PFRDA rules, at retirement you can take up to 60% of the corpus as a tax-free lump sum. The remaining minimum 40% must buy an annuity — a pension product from an insurer that pays you a regular monthly income for life. The calculator estimates both your lump sum and the monthly pension your annuity would pay.

The extra tax break

Beyond the ₹1.5 lakh under Section 80C, NPS offers an additional ₹50,000 deduction under Section 80CCD(1B) — a benefit no other instrument gives. That makes it especially attractive once you've exhausted 80C; see our Section 80C guide for the full picture.

The bottom line

NPS is a disciplined, tax-efficient way to fund retirement — just remember part of it becomes a pension rather than cash. Enter your age, contribution and expected return in the NPS calculator to see your corpus, lump sum and monthly pension at 60.