Everything You Need to Know About an NPS Calculator

We often tend to plan for the next day, the next week, or a few months from now, yet plans from a year from now are not really set in stone. Planning for our retirement – ensuring that we have enough cash flow to last us till our end after we are no longer working – is often one of those ‘new-year-goals’ that never see fruition. Yet, planning for your retirement is a necessary lifelong process. While you can begin anytime, it is best to account for it from the beginning of your career life. The National Pension System or NPS is an emerging low-investment route to building a financial corpus post-retirement.

Here, corpus meaning in NPS is the total amount of money that has been invested by an individual in their National Pension System (NPS) account. Using an NPS calculator – an online tool available across banking and government websites in the digital age – you can calculate how much you will be able to save for a safe retirement. To understand how it works, why it benefits you, and how you can use an NPS calculator, this blog has you covered.

What is the National Pension Scheme?

Like savings, the National Pension Scheme or NPS works as a post-retirement savings option where you can deposit a monthly amount every month to withdraw a regular monthly income once you reach the age of retirement. This government-sponsored scheme was launched in the year 2004 for government employees. In the year 2009, it was expanded to the general public as well, so that all citizens in the nation can not only get an old-age security mechanism in place for themselves, but also can earn long-term revenue from it to plan their returns post-retirement effectively and safely. Regulated by the PFRDA or the Pension Fund Regulatory and Development Authority, all NPS assets are held under the (NPST) National Pension System Trust, the registered owner as established by the PFRDA. 

Anyone (Indian citizens) from age 18 to 60 can join NPS. Under this system, citizens can not only change or select their asset entities, funds, and investment patterns, but they can also optimize their returns with the help of fund managers, essentially managing either of two types of NPS accounts – Tier 1 and Tier 2. Tier 1 is for retirement savings where you can make a minimum deposit of INR 500 during the opening of the account, and you can also earn tax benefits under Income Tax Act’s section 80CCD (1B). Here, you can only withdraw up to 60% of the collected corpus. While Tier-2 requires a minimum investment of INR 1000, you can freely withdraw your entire financial corpus at any given point in time. That said, no tax benefits are available for Tier 2 NPS accounts. The NPS maturity age is 60 years.

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Benefits of NPS for You

There are several benefits of NPS you should know about, other than the overall fact that it is a great retirement planning financial tool:

• NPS comes with a range of investment options and PF (pension fund) choices, where you can even switch from one type of investment to the other
• You get a simple PRAN or Permanent Retirement Account Number that stays with you for the lifetime under a Tier 1 or Tier 2 account
• You can move anywhere in India without affecting your NPS account which is extremely portable. Even NRIs can continue their contribution by opening an NPS NRI account 
• NPS is safe as it is regulated by the PFRDA and monitored by fund managers in the NPS trust
• NPS account maintenance costs are one of the lowest in comparison to other pension products across the world, creating higher savings for you
• Wealth accumulation is a compounding process, meaning your money will earn its own money over time for you
• NPS accounts are easily manageable from anywhere online and can be opened through the eNPS portal where you can manage all your funds with ease.
• The NPS annuity rate is 6%.

What is an NPS Pension Calculator

There are several types of NPS investment calculators to measure how much your returns will be over the long term, the tax benefits earned, or even specific to account types such as the NPS tier 2 returns calculator. Such online tools available both on the government website as well as from banking portals are free to use and serve as a tool to understand how much money they may need to save every month, to reach their desired financial goal after retirement. You can for instance also use the NPS return calculator to understand how much profit you will be able to generate by increasing the monthly contribution to an NPS account for instance. Finally, you can also use NPS tax benefit calculators, which allow you to measure how much savings in tax you can earn, given that NPS not only allows you to create a retirement fund with asset classes of your choice but also allows for a tax saving of up to INR 50,000 under 80 CCD (1B). You can easily gauge how much of the tax returns you can use to increase the NPS monthly contribution throughout your life.

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How to Use an NPS Amount Calculator?

To use an NPS calculator tool online, you can simply visit the NPST official website at https://www.npstrust.org.in/, and follow the steps below.

• Click on ‘Subscribers’ and then on ‘I am interested in NPS’, and finally on ‘Calculate the pension need’

• You will be redirected to a new page at https://www.npstrust.org.in/content/pension-calculator

• Here, by filling in the relevant details including your date of birth, the contribution per month, duration of contribution, the expectation of the return in percentage etc. you will be able to see the total pension corpus at retirement. You will also be able to see the total monthly pension. Of course, how the NPS is actually calculated may vary, in reality, will depend on your unique circumstances, investing capacity, the current rate of return etc. 

How to Calculate NPS?

There are a few things that are taken into account for NPS interest calculation, wherein the general formula is given as MV = P*(1+r/n)^nt

Where: 

• MV is the maturity value
• P is the total invested principal
• R is the assumed or expected return rate 
• T is the total tenure of the investment

So, over a tenure of 35 years (from 25 years of age), if you have invested INR 5,000 per month (for a total of INR 21 lakhs) with a return of 14%, then the total maturity value will be INR 5.62 crore and the monthly pension expected in this case will be INR 1.24 lakhs – a healthy return if you ask anyone.

NPS Investment Calculator: National Pension Scheme Calculator for Government Employees

If you are a government employee in India, you also get attractive returns as part of the perks you get. This includes a higher contribution from the government from 10% to 14% for its employees under the Tier 1 account. If you are using an NPS calculator for government employees therefore you should also know that the central government has given you the freedom to select your investment patterns, and also given a tax exemption of up to 40% for lump-sum withdrawals. Furthermore, an NPS calculator for central government employees in terms of taxes will also reveal that for Tier 2 accounts, you are allowed a deduction of up to INR 1.5 lakhs covered, under the Income Tax Act’s Section 80C, conditional to the completion of a three-year lock-in period. 

Also read: Deduction On Income Tax Under Section 80C of Income Tax Act

Why is an NPS Scheme Calculator Necessary?

The NPS pension calculator can help you in the following ways.

• You receive the sum of money to which you are legally entitled in the future. The pension payment is a liability, not an investment. To determine the entire corpus, an NPS corpus calculator is required.
• No person is permitted to withdraw the full amount of post-retirement under the current legislation. Additionally, annuities must be used to invest 40% of the whole amount. Furthermore, taxes are levied on the remaining 60%. Once you begin utilising an NPS tier 1 calculator or NPS tier 2 calculator all these numbers will be revealed in full.
• The calculator is error-free. You will know how difficult it is if you have ever attempted to manually calculate the pension amounts. Fortunately, an NPS calculator will completely automate the procedure.
• Finally, using the best NPS calculator, you can now figure out the taxation policy for pension funds, how much money you will have overall at the end of each month, and many other data points.

What Details Can an NPS Calculator Provide You With?

You may view the details of your investment with the use of an NPS calculator. It will display your investment amount during the scheme’s accumulation period, your interest earnings, and the total corpus generated at maturity. Alternatively, you can also refer to a national pension scheme chart to know what your monthly contribution needs to be to reach your goal pension amount.

The calculator also displays the breakdown of your lump sum withdrawal and the amount that is reinvested in order for you to get a monthly pension. It also displays your monthly pension payment amount based on the annuity's anticipated returns.

NPS Calculator for Banks

If you want your bank to facilitate an NPS account, you can do so. Before doing so, you can also gauge how much rate of return they are offering at present so that you know how much you will save post-retirement. Let us go over some of the NPS calculators of a few major banks to know how they work.

NPS Calculator SBI

As part of SBI pension funds (p) Ltd., you can use the SBI NPS calculator at https://www.sbipensionfunds.com/nps-calculator/. Not only can you calculate how much pension you will receive post-retirement, but you can also see how much lump sum amount you can withdraw over time, as well as the percentage of pension wealth that you can reinvest in an annuity plan. 

NPS Calculator HDFC Bank

Similarly, for HDFC bank, you can use the NPS calculator available at https://www.hdfcsec.com/offering/nps-national-pension-scheme-calculator, where you can input your age, how much you want to invest every month, and how much lump sum withdrawal you would want at 60 years, and you will be able to see your retirement corpus, the principal invested, as well as the returns earned. 

NPS Calculator ICICI

ICICI bank (at https://www.icicidirect.com/nps-calculator) also offers a similar calculator where filling in your age, contribution per month, expected return on investment, annuity rate etc. will not only show you how your pension account will grow over the years but also how much your retirement corpus will be. 

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Get the Most Relevant Financial Advice 

You should always seek expert financial advice for your retirement, given planning for it is a lifelong process and you should avoid as many mistakes, and save as much as possible – starting as soon as possible. If you don’t know where to begin, be sure to check out NoBroker’s top-starred legal and financial experts, who can guide you in the right direction, at the lowest price quotes in the market. For more details, check out our services below.

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