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NPS calculator allows an individual to compute the provisional lump sum and pension amount a subscriber, under NPS, can expect at retirement based on the contributions made monthly; the annuity purchased, the expected rate of returns on investments, and the annuity. The NPS calculator only illustrates the tentative pension and does not guarantee the exact figure.
The NPS calculator can be used by all individuals who are eligible to invest in the National Pension Scheme.
Eligibility criteria: The NPS rules state that all Indian citizens over the age of 18 years but not more than 60 years are eligible to invest in the pension scheme. Also, applicants will be required to comply with the Know-Your-Customer (KYC) guidelines to start investing in the NPS scheme.
Here’s a step-by-step guide to using the NPS calculator:
First, you will be required to enter the following details in an ordered manner:
Date of Birth (DOB) – The calculator will calculate the number of years you will be able to contribute to the scheme after entering your date of birth.
Investment Amount – Enter the amount you would like to contribute every month.
Expected Return on Investment (ROI) –Choose your desired return on investment.
Percentage of Annuity to be Purchased –This is the percentage of the corpus, i.e. pension wealth you would like to reinvest to purchase an annuity on maturity. An annuity in NPS refers to the pension the NPS subscriber would receive every month from the Annuity Service Provider (ASP).
Note: The percentage of corpus to be reinvested in an annuity cannot be less than 40%. However, if you plan on exiting the scheme prematurely, i.e. before the age of 60, the minimum percentage of pension wealth to be reinvested in an annuity is 80%.
Expected Annuity Rate –Enter the expected rate of annuity, i.e. the amount you expect from your pension.
Once all the inputs have been entered, the NPS calculator will simultaneously begin computing the lump sum and pension amount you can expect at the time of maturity.
The calculator generates a summary of your pension account at the time of retirement with the total amount you would have contributed during the period and the corpus generated on maturity.
Also, the NPS calculator computes your expected monthly pension that you would receive based on the returns you expect on the Annuity.
Here is an example to help you understand how the NPS calculator computes your monthly pension.
Mr Vineeth is a 24-year old central government employee. He subscribes for the National Pension Scheme and decides to contribute Rs 2,000 every month towards the scheme. NPS matures when the subscriber turns 60 years of age. Meaning, Vineeth will able to contribute for the next 36 years towards the scheme and expects a return on investment (ROI) of 9% per annum. In the same line, he would like to purchase an annuity for 50% and expect a 7% rate of return on the annuity.
The status of Vineeth’s pension account at retirement as generated by the NPS calculator will be as follows:
Total investment: Rs 8,64,000
Total corpus generated: Rs 65,08,958
Also, a summary of his pension account would be generated by the calculator.
Lump sum value: Rs 32,54,479
Annuity value: Rs 32,54,479
Expected monthly pension: Rs 18,984
Note: The illustration is purely indicative and does not guarantee the actual figures.
What is the current interest rate of NPS?
The current interest rate on the National Pension Scheme (NPS) as of February 2020 ranges from 9% to 12% depending on the type of scheme and subscriber.
What is the minimum contribution for Tier I and Tier II NPS subscribers?
Tier I subscribers of the NPS scheme are required to make a minimum initial contribution of Rs 500 at the time of registration after which subscribers can contribute a minimum of Rs 500 per contribution. However, Tier I subscribers are required to contribute at least Rs 1,000 during the financial year. The minimum initial contribution for Tier II NPS subscribers, on the other hand, is Rs 1,000. The minimum amount per contribution for Tier I subscribers is Rs 250.
What are the tax benefits under NPS?
As per Section 80CCD (1) of the Income Tax Act, individual subscribers of the National Pension Scheme (NPS) are eligible for tax benefits up to 10% of the gross income until Rs 1.50 lakh under Section 80 CCE. Also, individual Tier I NPS subscribers are eligible for additional tax benefits under Subsection 80CCD (1B) of the IT Act, 1961. Subscribers can avail deduction up to Rs 50,000 on investments made towards the NPS scheme above the tax deduction available under Section 80C of the IT Act.
What is Annuity?
Annuity refers to the amount an NPS subscriber would receive from the Annuity Service Provider (ASP). The subscriber will be required to decide the percentage of pension wealth to be utilised for the purchase of Annuity. While the minimum percentage of the pension amount to be used for the purchase of the Annuity in the case of Superannuation is 40%, pre-mature exits from NPS require at 80% of the pension wealth to be used for purchasing an annuity from the ASPs.