Project your National Pension System corpus at 60, the 40% that must buy an annuity, the 60% lump sum, and the monthly pension it could pay.
Why must part of it buy an annuity?
NPS is built to pay a pension for life, not to hand over a pile of cash at 60. The rules make at least 40% of the corpus buy an annuity for that reason. You can always annuitise more if you want a larger monthly income.
What if my corpus is small?
A corpus of ₹5,00,000 or less at normal exit can be withdrawn in full, with no annuity. On an exit before 60, the ceiling is ₹2,50,000 and at least 80% would otherwise have to be annuitised.
What return should I assume?
Something you can defend. NPS funds hold a mix of equity, corporate bonds, and government securities, and your allocation drives the outcome. Try 8%, 10%, and 12% and see how wide the range gets - that spread is the honest answer.
Is the pension taxable?
Yes. The annuity income is taxed as income in the year you receive it, at your slab rate. The lump sum at exit is exempt within the limits the Act sets. Plan for tax on the pension, not on the corpus.
Does NPS save me tax now?
In the old regime, section 80CCD(1B) allows an extra ₹50,000 above the 80C ceiling. Employer contributions under 80CCD(2) are allowed in both regimes. Run the income tax calculator both ways before you decide how much to put in.
Can I leave before 60?
Yes, after the minimum subscription period, but the terms tighten. At least 80% of the corpus must buy an annuity and only 20% comes as cash. That is the price of early access to a pension product.