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PFRDA exit rules
Statutory Scheme · India

NPS Calculator

National Pension System Tier 1: what your contributions accumulate to by 60, how the corpus splits between a lump sum and a compulsory annuity, and what monthly pension that annuity actually buys.

India only. The National Pension System is regulated by the PFRDA. All amounts are in rupees, and the exit rules modelled here apply to Tier 1 accounts, as set by the PFRDA exit regulations amended on 12 December 2025.

Accumulation

Tier 1 contributions are locked until 60

Yrs
18 Yrs65 Yrs
Yrs
60 Yrs75 Yrs

Normal exit is 60. Deferral up to 75 is permitted.

₹
%
4%15%

Depends on your equity/debt allocation across the E, C and G schemes.

Exit at Retirement

At least 20% of the corpus must buy an annuity

Subscriber Type

Government-sector subscribers must annuitise at least 40%; everyone else at least 20%, or nothing if the corpus is ₹8 lakh or less.

%

The minimum for this exit is 20%. The rest is paid as a lump sum.

%
3%10%

Quoted by the insurer at exit. Joint-life and return-of-purchase-price options pay less.

%
0%42%

Used to estimate the Section 80CCD(1B) saving.

Corpus at Retirement

₹1,13,96,627

After 30 years of contributions

Monthly Pension

₹11,397

From a ₹22,79,325 annuity

Lump Sum

₹91,17,301

80% of the corpus

You Contributed

₹18,00,000

Growth of ₹95,96,627

How the Corpus Splits

At 60, the money divides two ways and only one is accessible

80%
20%
Lump sum₹91,17,301
Annuity purchase (compulsory)₹22,79,325
Estimated 80CCD(1B) tax saved over career₹4,50,000

Rules and caveats

  • •India only. Governed by PFRDA rules. Tier 1 contributions are locked until 60 apart from limited partial withdrawals.
  • •For a non-government subscriber exiting at 60, at least 20% of the corpus must buy an annuity, under the PFRDA exit regulations as amended on 12 December 2025. Your split uses 20% for the annuity.
  • •Tax on the lump sum is not modelled. Check the current income-tax treatment of NPS withdrawals before relying on an after-tax figure.
  • •The pension shown applies your assumed annuity rate to the annuity corpus. Actual rates are quoted by insurers at the time of purchase and vary by annuity type — a joint-life or return-of-purchase-price option pays less.
  • •Annuity income is taxable as ordinary income in the year received, which the pension figure above does not deduct.
Indian Retirement7 min readSanguine Straphanger

NPS: Cheap, Tax-Efficient, and Only Partly Yours at 60

The accumulation phase is genuinely excellent. The exit rules are where the trade-offs live, and they are worth understanding before you commit.

What NPS does well

Fund management charges affect how much of the portfolio return remains after fees. NPS offers an allocation choice across equity (E), corporate debt (C) and government securities (G), with an auto-choice lifecycle option that de-risks as you age.

The tax treatment is the other draw. Beyond the Section 80C limit, Section 80CCD(1B) gives an additional deduction of up to ₹50,000 a year specifically for NPS — which, in the highest slab, is a meaningful annual saving compounded over a career.

Accumulation (annuity due)

FV = P × [((1 + r/12)^(12N) − 1) ÷ (r/12)] × (1 + r/12)

  • P = monthly contribution, N = years to 60
  • Contributions assumed at the start of each month

The exit rule that surprises people

At 60 you cannot simply take the whole corpus. Under the PFRDA exit regulations as amended on 12 December 2025, a non-government subscriber must use at least 20% to buy an annuity from an approved insurer, and a government-sector subscriber at least 40%; the rest can be taken as a lump sum. A non-government corpus of ₹8 lakh or less can be withdrawn in full.

That compulsory annuity is the central trade-off. It guarantees income for life, which is real longevity protection. But annuity rates are whatever insurers quote on the day you retire — you have no control over them and no way to hedge — and the income is taxable as ordinary income in the year received.

Move the annuity rate slider and watch the pension figure. A single percentage point changes the monthly income substantially, and you will not know your rate until the day you exit.

What the pension figure does not include

The monthly pension shown applies your assumed rate to the annuity corpus. Three things it does not adjust for:

Tax. Annuity income is taxable. The figure above is gross.

Inflation. Most annuities in the Indian market are level, not index-linked. A pension fixed at 60 buys progressively less every year of a thirty-year retirement.

Annuity type. A joint-life annuity covering a spouse, or one returning the purchase price to heirs, pays a lower monthly amount than the simple life annuity implied by a single rate.

Tier 1 versus Tier 2

Tier 1 is the retirement account: locked to 60, tax deductions available, exit rules as above. Tier 2 is a voluntary savings account with no lock-in and no deduction for most subscribers — effectively a low-cost mutual fund wrapper. Only Tier 1 is modelled here.

Frequently Asked Questions & Quantitative Reference

Can I withdraw before 60?
Partial withdrawals of up to 25% of your own contributions are permitted after three years for specified purposes including higher education, marriage, home purchase and serious illness. A full premature exit is possible but requires 80% of the corpus to go into an annuity, leaving only 20% as a lump sum, unless the corpus is ₹5 lakh or less, which can be withdrawn in full. That is a much harsher split than at 60.
What return should I assume?
It depends on your allocation. A heavily equity-weighted account has a higher expected return and much higher variability; a G-scheme-weighted one is closer to government bond yields. The auto-choice lifecycle funds reduce equity with age. Treat any single figure as one path among many, not a projection.
Can the minimum annuity share be lowered?
No. It is a statutory floor: 20% for a non-government subscriber exiting at 60, and 40% for a government-sector subscriber. A non-government subscriber whose corpus is ₹8 lakh or less can withdraw everything without buying an annuity. Setting the slider below the floor here snaps back to the minimum.
How does NPS compare with PPF or EPF?
They differ in lock-in, guarantee and tax at exit. PPF is fully tax-free at every stage with a government-set rate. EPF is employment-linked with a declared rate. NPS is market-linked with lower charges, an extra deduction, and a compulsory annuity at exit. Most people end up holding more than one; this tool does not recommend an allocation between them.
Disclaimer

Educational tool for the Indian National Pension System only. Exit rules, tax treatment and annuity products are set by the PFRDA and insurers and can change. Not tax, investment or retirement advice — consult a qualified adviser.

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