It follows the exit rules PFRDA amended in December 2025: non-government subscribers can take up to 80% as a lump sum and must use at least 20% to buy an annuity.
How NPS corpus and pension are calculated
Corpus = monthly SIP growth to retirement | Pension = Corpus × Annuity % × Annuity rate ÷ 12
- Corpus
- Value of all contributions at retirement
- Lump sum
- Up to 80% of the corpus for non-government subscribers
- Annuity %
- At least 20% (40% for government employees)
- Annuity rate
- Yearly payout rate offered by insurers, typically 5.5 to 7%
Contributions are assumed monthly with monthly compounding at the expected return. Actual NPS returns depend on your equity, corporate bond and government bond mix.
If your corpus is ₹8 lakh or less, you can withdraw all of it. Generally 60% of the corpus is tax free when withdrawn; check the tax treatment of any amount above that before you exit.
NPS tax benefits
NPS is one of the few investments that still helps under the new tax regime.
- Employer contributions up to 14% of basic plus DA are deductible in the new regime.
- Under the old regime, you can claim up to ₹1.5 lakh under 80C plus an extra ₹50,000 under 80CCD(1B).
- Annuity income is taxed as income in the year you receive it.
- Partial withdrawals for specific needs are allowed after 3 years.