Contribute ₹10,000/month from age 30 to 60 at 10% return. Total corpus = ₹2.28 crore (invested ₹36 lakh, wealth gained ₹1.92 crore). With 40% annuity at 6% rate: lump sum = ₹1.37 crore (tax-free) and monthly pension = ₹45,600. But at 6% inflation, this ₹45,600 pension will buy what only ₹7,900 buys today. The gap between nominal pension and real purchasing power is the central challenge of retirement — plan with our Inflation Calculator.
This Pension Calculator India projects your retirement corpus from monthly contributions, splits it into NPS-style lump sum withdrawal and annuity purchase, calculates your monthly pension, and — most critically — shows how inflation will erode your pension's purchasing power over 25+ years of retirement. The inflation angle is what makes this calculator unique: most pension calculators show only the nominal pension amount, hiding the devastating impact of inflation on fixed annuity payments.
India's pension coverage is among the lowest globally — less than 10% of the workforce has any formal pension. For the remaining 90%, systematic retirement planning through NPS, EPF, PPF, and mutual fund SIP is the only path to financial security in old age. Use this calculator alongside our NPS Calculator (for NPS-specific tax benefits), EPF Calculator (employer-matched savings), and Retirement Corpus Calculator (comprehensive expense-based planning).
| Monthly SIP | Start Age 25 (35 yrs) | Start Age 30 (30 yrs) | Start Age 35 (25 yrs) | Start Age 40 (20 yrs) |
|---|---|---|---|---|
| ₹5,000 | ₹46,200 | ₹22,800 | ₹11,100 | ₹5,200 |
| ₹10,000 | ₹92,400 | ₹45,600 | ₹22,200 | ₹10,400 |
| ₹15,000 | ₹1,38,600 | ₹68,400 | ₹33,300 | ₹15,600 |
| ₹20,000 | ₹1,84,800 | ₹91,200 | ₹44,400 | ₹20,800 |
| ₹30,000 | ₹2,77,200 | ₹1,36,800 | ₹66,600 | ₹31,200 |
Assumptions: 10% CAGR, 40% annuity, 6% annuity rate. Starting 10 years earlier roughly doubles the pension. Starting 5 years earlier increases it by 50-60%. For the exact cost of delay, use our Cost of Delay Calculator. Consider a step-up approach via our Mutual Fund Step-Up SIP Calculator.
| Section | Deduction | Limit | Tax Regime |
|---|---|---|---|
| 80CCD(1) — Employee NPS | NPS contribution (within 80C) | ₹1.5 lakh | Old regime only |
| 80CCD(1B) — Additional NPS | Extra NPS deduction | ₹50,000 (exclusive) | Old regime only |
| 80CCD(2) — Employer NPS | Employer contribution to NPS | 14% of salary (Central Govt) / 10% (Private) | Both old and new regime |
| Lump sum at 60 | 60% corpus withdrawal | Tax-free (no limit) | Both regimes |
| Annuity income | Monthly pension received | Taxable at slab rate | Both regimes |
The combined NPS tax benefit can save up to ₹2+ lakh annually. Use our Income Tax Calculator to compare old vs new regime, Tax Savings Calculator for full 80C optimization including ELSS, PPF, EPF, and NSC via our NSC Calculator. For salary structuring, explore our HRA Calculator and Gratuity Calculator.
| Feature | NPS | EPF | PPF | Equity MF SIP |
|---|---|---|---|---|
| Return (historic) | 9-12% (equity) | 8.25% (guaranteed) | 7.1% (tax-free) | 12-15% (market) |
| Tax on Returns | Annuity taxable | EEE (fully tax-free) | EEE (fully tax-free) | LTCG 12.5% above ₹1.25L |
| Flexibility | Low (40% annuity mandatory) | Low (lock-in till 58) | Medium (15yr, partial withdrawal) | High (SWP any time) |
| Inflation Protection | No (fixed annuity) | Rate revised annually | Rate revised quarterly | Yes (market-linked growth) |
| SEBI/PFRDA Regulated | PFRDA | EPFO | Government | SEBI |
The optimal strategy combines all four: EPF for guaranteed base with employer matching, NPS for additional tax benefit and equity exposure, PPF for tax-free debt allocation, and equity mutual fund SIP for highest long-term growth and SWP flexibility in retirement. Use our SIP Calculator, PPF Calculator, EPF Calculator, and FD Calculator for individual projections. For comprehensive goal-based planning, see our FIRE Calculator and Lumpsum Calculator for one-time investments.
Pension in India is calculated differently depending on the scheme. For NPS (National Pension System): your monthly contributions grow via compounding over your working years to build a retirement corpus. At age 60, minimum 40% of the corpus must be used to purchase an annuity from an insurance company, which provides a monthly pension for life. The remaining 60% can be withdrawn as a tax-free lump sum. Monthly Pension = (Annuity Corpus x Annuity Rate) / 12. For EPS (Employees Pension Scheme): Monthly Pension = (Pensionable Salary x Pensionable Service) / 70, where pensionable salary is the average of last 60 months and service is capped at 35 years.
Under current PFRDA rules, the minimum annuity purchase is 40% of the accumulated NPS corpus at the time of superannuation (retirement at age 60). The remaining 60% can be withdrawn as a tax-free lump sum. However, for premature exits (before age 60), the minimum annuity purchase is 80% of the corpus. If the total corpus is ₹5 lakh or less, the entire amount can be withdrawn as a lump sum without purchasing any annuity. You can choose to allocate more than 40% to annuity for a higher monthly pension — this calculator lets you adjust the annuity percentage from 40% to 100%.
NPS annuity rates in India typically range from 5% to 7% per annum, depending on the annuity service provider (ASP) and the type of annuity chosen. Common annuity options include: Annuity for Life (single) at 5.5-6.5%, Annuity for Life with Return of Purchase Price at 5-6%, Joint Life Annuity at 5-5.5%, and Annuity Increasing at 3% per year at 4-5%. The annuity rate is fixed at the time of purchase and remains constant for life. A 6% annuity rate on ₹40 lakh annuity corpus provides ₹2.4 lakh annually or ₹20,000 monthly pension. Higher annuity rates provide more income but may not include spouse coverage or return of capital.
This is the most critical and underestimated risk in retirement planning. A monthly pension of ₹50,000 at retirement will have the purchasing power of only ₹23,300 after 15 years of retirement at 6% inflation. After 25 years, it drops to ₹13,400 — a 73% loss in real value. Unlike government pensions, NPS annuity payments are fixed and do not increase with inflation (unless you choose the 3% annual increase option, which starts at a much lower base). This means your standard of living will decline every year in retirement. To counter this, build a larger corpus, choose inflation-indexed annuity, and maintain an equity SIP component even in retirement.
NPS offers triple tax benefits under the old regime: Section 80CCD(1) allows deduction up to ₹1.5 lakh on employee contribution (within the overall 80C limit). Section 80CCD(1B) provides an additional ₹50,000 deduction exclusive to NPS. Section 80CCD(2) allows employer contribution up to 14% of salary (for central government) or 10% (private sector) as tax-free, with no upper limit. At retirement, 60% of corpus withdrawn as lump sum is completely tax-free. Only the annuity income is taxable at your applicable slab rate. Under the new tax regime, only 80CCD(2) employer contribution benefit is available. Total tax saving can exceed ₹2 lakh annually.
Each serves a different role: NPS offers market-linked returns (9-12% historically for equity allocation), flexible asset allocation, and specific tax benefits under 80CCD(1B). EPF provides guaranteed 8.25% return, employer matching contribution, and EEE tax status (tax-free at all stages). PPF offers 7.1% tax-free return with 15-year lock-in and EEE status. For optimal retirement planning, use all three: EPF for guaranteed base corpus with employer matching, NPS for additional ₹50,000 tax deduction and higher equity exposure, and PPF for tax-free long-term savings. Use our EPF Calculator, NPS Calculator, and PPF Calculator for individual projections.
Financial planners recommend that your retirement income should replace 70-80% of your pre-retirement income. If your current monthly expenses are ₹50,000, you need ₹35,000-40,000 per month in retirement at today's prices. However, accounting for inflation at 6% over 25 years, this becomes ₹1.5-1.7 lakh per month. To generate ₹1.5 lakh per month from a 6% annuity, you need a corpus of ₹3 crore just for the annuity portion. Adding the lump sum component, total retirement corpus needed is ₹5-7.5 crore. Use our Retirement Corpus Calculator for a detailed computation and our FIRE Calculator for early retirement scenarios.
If an NPS subscriber dies before reaching retirement age, the entire accumulated corpus (100%) is paid to the nominee or legal heir as a lump sum. There is no mandatory annuity purchase in case of death. The nominee receives the full corpus tax-free. This makes NPS nomination critically important — ensure you have an updated nominee registered. If no nominee is registered, the legal heir must provide a succession certificate, which involves court proceedings and delays. After retirement, if the subscriber has purchased an annuity with Return of Purchase Price or Joint Life option, the annuity corpus is returned to the nominee or continues as spouse pension respectively.
Disclaimer: Pension amounts depend on actual market returns, annuity rates at retirement, and PFRDA rules, which may change. This calculator provides illustrative projections based on assumed constant rates. Actual NPS returns are market-linked and not guaranteed. Annuity rates vary by insurance company and annuity type. Consult a SEBI-registered financial advisor for personalized retirement planning.