National Pension Scheme (NPS) Calculator: Here¡¯s How You Can Get Rs 1.50 Lakh Pension Monthly By Investing Rs 10,000 Per Month

National Pension Scheme (NPS) Calculator: The National Pension Scheme (NPS) is a retirement plan managed by the government, designed to provide a lump sum payment and monthly pension to individuals upon retirement. Initially created for government employees, it has since been extended to include private sector workers under the National Pension System.

Contributors to the NPS make monthly payments, which the government then invests in various avenues such as market-linked programs, debt, corporate bonds, and securities. These investments generate compound returns, meaning the fund grows faster over time.

Upon reaching the age of 60, account holders have two choices: they can withdraw up to 60% of their savings as a lump sum, with the remaining 40% being invested in a scheme for guaranteed returns, from which a monthly pension is provided.

National Pension Scheme (NPS) Key Features & Benefits

Saving | Photo: Unsplash

NPS is based on a unique number called Permanent Retirement Account Number (PRAN) given to each subscriber. To encourage saving, the government has made the scheme secure and offers attractive benefits for NPS account holders.

Benefits of NPS:

• Regulated: NPS is controlled by PFRDA, ensuring clear rules. The NPS Trust makes sure guidelines are followed through regular checks.
• Voluntary: Anyone in India can join NPS. You can invest any amount whenever you want.
• Flexibility: You can choose or change your Point of Presence (POP), investment plan, and fund manager. This lets you maximize returns based on your comfort with different assets and managers.
• Affordable: NPS is one of the cheapest investment options available.
• Portability: Your NPS account and PRAN stay the same even if you change jobs, cities, or states.
• Superannuation Fund Transfer: NPS account holders can move their Superannuation funds to their NPS account without tax implications after approval.

Tax Benefits:

For Salaried Individuals:

You can claim tax exemption up to Rs. 50,000 under section 80CCD (1B), on top of the Rs. 1,50,000 limit under section 80C.

For Self-Employed Individuals:

You can invest up to 10% of your basic salary + dearness allowance and claim tax exemption under section 80CCD (1), within the Rs. 1,50,000 limit of section 80C.

You can invest up to 20% of your gross annual income and claim tax exemption under section 80CCD(1), within the Rs. 1,50,000 limit of section 80C.

National Pension Scheme (NPS) Withdrawal

NPS is a long-term investment plan. You can take out your money when you turn 60 or when the plan matures. You might also withdraw early in certain cases or if the account holder passes away.

When you withdraw your money at 60, you can take out up to 60% as a lump sum. You have to put at least 40% into annuities, which give you a monthly pension.

NPS Partial Withdrawal

After keeping your money in NPS for three years, you can take out some without paying tax. You can do this three times, taking out up to 25% each time.

You can do this for important things like a child's wedding, further education, serious illness, buying or building a house, and more.

NPS Partial Early Exit

You can leave NPS early, but you have to wait five years, and you can only take out 20% of your total savings. The rest has to go into annuities.

If your savings are less than Rs 2.50 lakh, you can take out everything.

NPS Death Claims

If someone in NPS passes away before they turn 60, their nominee can take out all the money. After 60, their legal heir will get a pension or savings depending on what annuity plan was chosen.

The power of compounding means even modest contributions, like Rs 10,000 per month starting at age 25, could result in a substantial pension exceeding Rs 1.50 lakh per month upon retirement. This article aims to illustrate how this is achievable through calculations.

To understand how a Rs 10,000 monthly contribution can lead to a pension exceeding Rs 1.50 lakh, let's consider a scenario:

Imagine you start contributing Rs 10,000 per month to your NPS account at the age of 25. You continue these contributions for the next 35 years, with an assumed annual return of 10%. Upon reaching 60, you decide to withdraw a portion as a lump sum and reinvest the rest into annuities. Here are four possible outcomes:

If you withdraw 40% as a lump sum:

• Your total contributions over 35 years would be Rs 42 lakh.
• With total gains, your corpus would amount to Rs 3.83 crore.
• Withdrawn lump sum: Rs 2.29 crore.
• Annuity value: Rs 1.53 crore.
• At a 6% annual return, this would yield a monthly income of Rs 76,566.

If you withdraw 60% as a lump sum:

• Same contributions and gains as before.
• Withdrawn lump sum: Rs 1.53 crore.
• Annuity value: Rs 2.29 crore.
• At a 6% annual return, this would yield a monthly income of Rs 1,14,848.

If you withdraw 80% as a lump sum:

• Same contributions and gains as before.
• Withdrawn lump sum: Rs 76.57 lakh.
• Annuity value: Rs 3.06 crore.
• At a 6% annual return, this would yield a monthly income of Rs 1,53,131.

If you withdraw 100% as a lump sum:

• Same contributions and gains as before.
• No withdrawal from the corpus, annuity value remains Rs 3.83 crore.
• At a 6% annual return, this would yield a monthly income of Rs 1,91,414.

Through prudent contributions and investment decisions, it's possible to secure a substantial monthly pension from the NPS, even with a modest starting amount like Rs 10,000 per month.

(Disclaimer: The information provided in this article is for educational and illustrative purposes only. The calculations and scenarios presented are based on assumptions and hypothetical situations. Actual results may vary based on numerous factors including but not limited to market conditions, investment performance, taxation laws, and individual circumstances. Readers are advised to consult with qualified financial advisors or tax professionals before making any decisions regarding their retirement planning or investment strategies. The author and publisher do not guarantee the accuracy, completeness, or reliability of the information provided, and shall not be held liable for any losses or damages arising from the use of this information.)

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