The National Pension System, or NPS, is a retirement plan scheme. It was launched to provide financial stability to Indian citizens after their retirement. The scheme, earlier also known as the National Pension Scheme, was launched by the Government of India on January 1, 2004, for government employees. Still, on May 1, 2009, it was opened to all citizens of India, including unorganized sectors, and the Pension Fund Regulatory and Development Authority (PFRDA) is regulating this scheme.
What is NPS Calculator
The NPS calculator is an online tool that estimates the total corpus on retirement that comes under the National Pension System (NPS). It requires only a few details to estimate returns, such as current age (18-60), monthly contribution, expected annual return, and annuity investment. This is a handy tool; do the calculation in seconds for total investment, expected corpus, wealth gained, annuity amount, and lump sum amount. You can use this tool for retirement planning, and this helps to provide a clear idea of savings and future pension.
How to calculate NPS Contribution using the NPS calculator
NPS Calculator by Toolifypro.com has a user-friendly interface and is easy for anyone, whether an experienced or a new investor. It can calculate the returns on your NPS contribution within seconds. Below are the steps that will help you to use the NPS calculator.
- Enter Your Current Age: Enter your current age; it must be between 18 and 60. Suppose you are currently 30 years old.
- Enter the Monthly Contribution: Here, you decide how much you want to invest; let’s suppose 5000 monthly or 60000 yearly.
- Expected Annual Return: Simply enter the expected returns %. Let’s suppose that the expected returns are 10% annually, and there is a variation in the returns percentage according to asset types.
1. Equity: These assets have a high risk in returns with high returns of 10-12% annual gains.
2. Corporate: These assets have moderate risk and give returns of about 8-10% yearly. and
3. government bonds: Investment in these bonds has low risk, but returns are also low compared to equity and corporate 6-8% returns annually. - Annuity Investment: Here, you have to mention that the annuity investment percentage as per NPS must be at least 40% for the amount used to buy the annuity, but investors can adjust up to 100%.
- Results: The NPS Calculator will dynamically calculate the returns based on the NPS interest rate and display values as Total Investment, Expected Corpus, Wealth Gained, Annuity Amount, and Lump Sum Amount.
NPS Calculation Example
Let’s take the example of the below-given values and estimate the NPS corpus and monthly pension.
- Current Age: 30 years
- Monthly Contribution: ₹5,000
- Expected Annual Return: 10%
- Retirement Age: 60 years
- Annuity Investment: 40% (used for monthly pension)
- Annuity Return Rate: 6% (assumed)
Step 1: NPS calculation Total Corpus at Retirement
Using the compound interest formula, we estimate the total corpus at 60 years.
Where:
- P = ₹5,000 (monthly contribution)
- r = 10% annual return → 0.10/12 = 0.00833 (monthly return)
- n = Total months invested = (60 – 30) × 12 = 360 months
Step 2: Lump Sum & Annuity Distribution
- Total Corpus at 60 years: ₹1,13,98,349 (~₹1.14 crore)
- 60% Lump Sum Withdrawal: ₹68,39,009 (~₹68.4 lakh)
- 40% Annuity Purchase: ₹45,59,340 (~₹45.6 lakh)
Step 3: Monthly Pension Calculation
The annuity amount of ₹45.6 lakh is invested at 6% annual return, giving a monthly pension:
Estimated results.
Total Retirement Corpus: ₹1.14 crore
Lump Sum Withdrawal: ₹68.4 lakh
Monthly Pension: ₹22,796
NPS Benefits
There are various benefits of NPS, whether they are corporate NPS benefits, NPS benefits tax, NPS benefits in the new tax regime, or NPS benefits after retirement.
- Retirement Goal Setting: NPS gives the freedom to live the dream retirement life because it has numerous NPS benefits after retirement.
- Tax Planning: By investing in the NPS, you can save up to 1.5 lakh (₹1.5 lakh) under Section 80C and an extra ₹50,000 under Section 80CCD(1B), whether NPS benefits in the new tax regime or NPS benefits tax.
- Motivation Boost: If you started with 5000 monthly, it may become ₹68.37 Lac on your retirement, or instead, if you invested 10000 monthly, it may become 1.37 Cr.
Wrap up words
The National Pension System (NPS) is a retirement scheme for people to provide financial stability in their retirement age, and the NPS Calculator by Toolifypro.com is a tool that helps investors to calculate the returns on their NPS contribution to estimate final corpus. This is a dynamic tool that calculates returns on a real-time basis, which includes total investment, expected corpus, wealth gained, annuity amount, and lump sum amount.