Annuity Calculator India — Monthly Pension from Corpus

Q: Is annuity income taxable in India?

Yes, annuity income is fully taxable at your income slab rate under the Income Tax Act. It is classified as 'income from other sources.' There is no special exemption or concessional rate. For a 30% slab holder receiving ₹6.5L annual annuity, the tax is ₹1.95L per year. This is why financial planners recommend combining annuity with tax-efficient SWP from equity mutual funds.

Q: How much of NPS goes to annuity?

Per PFRDA rules, at NPS maturity (age 60): minimum 40% of the corpus must be used to purchase an annuity from a PFRDA-empanelled insurer. The remaining 60% can be withdrawn as a tax-free lump sum under Section 10(12A). For early exit before age 60 (after 5 years), 80% must go to annuity and only 20% as lump sum. If total corpus is ₹5 lakh or less, full withdrawal is allowed without annuity purchase.

Q: Fixed vs increasing annuity: which is better?

Fixed annuity pays higher from day one but never increases — with 6% inflation, ₹54,000/month feels like ₹30,000 in 10 years. Increasing annuity (3-5% annual rise) starts lower but grows, with break-even around year 7-10. Choose increasing if you expect to live 15+ years post-retirement. Many planners recommend a hybrid: fixed annuity for essential expenses, equity SWP for inflation protection.

Q: Can I change my annuity provider later?

No, annuity purchase is generally irreversible. Once you buy an annuity, you cannot transfer to another provider or surrender for a refund (except during the 15-30 day free-look period). Compare rates across multiple insurers before purchasing. For NPS annuity, check PFRDA-empanelled insurers on the NPS Trust website. Compare annuity rate, claim settlement ratio, option availability, and insurer financial stability.

Calculate monthly pension from your retirement corpus, understand NPS 60/40 annuity split, and compare fixed vs increasing annuity options. Updated with LIC Jeevan Akshay reference rates, PFRDA rules, and FY 2025-26 income tax slabs.

Calculate monthly pension from your retirement corpus using an annuity plan

Retirement corpus

₹

Total amount to invest in annuity (e.g. ₹1,00,00,000)

Age at retirement

years

Your age when purchasing the annuity (affects annuity rate)

Annuity type

Life annuity pays highest rate. Joint life covers spouse. Return of purchase price returns corpus at death.

Income tax slab

Annuity income is fully taxable at your slab rate. New regime slabs FY 2025-26.

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How to Use This Calculator

Monthly Pension from Corpus tab

Enter your retirement corpus (e.g. ₹1,00,00,000), your age at retirement (default 60), and select the annuity type (life annuity, joint life, annuity certain 10/20 years, or life with return of purchase price). The calculator shows your gross monthly pension, tax deduction at your slab rate, and net monthly income. It also compares all five annuity types side by side so you can choose the best option for your situation.

NPS Annuity Split tab

Enter your total NPS corpus at maturity and the calculator splits it per PFRDA rules: 60% as a tax-free lump sum and 40% into mandatory annuity. It calculates monthly pension from the annuity portion and monthly SWP income if you invest the lump sum in a balanced mutual fund. This gives you a complete picture of your total post-retirement monthly income from NPS.

Fixed vs Increasing Annuity tab

Enter your corpus, fixed and increasing annuity rates, the annual increase percentage, and expected inflation. The calculator runs a 20-year year-by-year comparison showing both nominal and inflation-adjusted (real) pension values. It identifies the break-even year when the increasing pension catches up with fixed, helping you decide which option protects your purchasing power better over a long retirement.

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The Formula

Annuity pension is calculated as a percentage of the purchase price (corpus). The rate depends on your age, annuity type, and insurer:

Annual Pension:
Annual Pension = Corpus × Annuity Rate / 100

Monthly Pension (Gross):
Monthly Pension = Annual Pension / 12

Tax on Annuity Income:
Annual Tax = Annual Pension × Slab Rate
Monthly Tax = Annual Tax / 12

Net Monthly Pension:
Net Monthly = Monthly Pension − Monthly Tax

NPS Split (PFRDA rules):
Lump Sum = NPS Corpus × 60% (tax-free under Section 10(12A))
Annuity Purchase = NPS Corpus × 40% (mandatory)
Monthly SWP from Lump Sum = Lump Sum × SWP Rate / 12

Increasing Annuity (year n):
Pension_n = Starting Pension × (1 + Annual Increase)^n-1

Real Value (inflation-adjusted):
Real Pension_n = Nominal Pension_n / (1 + Inflation)^n-1

Annuity income is fully taxable as "income from other sources" under the Income Tax Act. There is no special exemption or lower rate for annuity income from insurance companies.

Example

Mohan — Retires at 60 with ₹1Cr corpus

Mohan (60) retires from a private company with a total retirement corpus of ₹1,00,00,000 (₹1 Cr). He wants to understand how much monthly pension he can get from an annuity, and whether NPS gives him a better deal with the 60/40 split. He is in the 30% tax slab.

Step 1: Life Annuity calculation

Corpus₹1,00,00,000

Age at retirement60 years

Annuity typeLife Annuity

Annuity rate (age 60)6.5% p.a.

Tax slab30%

Step 2: Monthly pension result

Annual pension income₹6,50,000

Monthly pension (gross)₹54,167

Monthly tax at 30%₹16,250

Net monthly pension₹37,917

Step 3: If ₹80L was in NPS (60/40 split)

NPS corpus₹80,00,000

Lump sum (60%, tax-free)₹48,00,000

Annuity purchase (40%)₹32,00,000

Monthly pension from annuity (6.5%)₹17,333

Monthly SWP from ₹48L at 8%₹32,000

Total monthly income₹49,333

Mohan realises that the NPS route gives him ₹49,333/month total income (annuity + SWP) versus ₹37,917/month from a pure annuity on ₹1Cr. The NPS 60% lump sum invested in a balanced fund via SWP is more tax-efficient because only gains (not principal) are taxed, and the corpus continues to grow.

FAQ

What is an annuity and how does it work in India? ▼

An annuity is a financial product sold by life insurance companies (LIC, HDFC Life, ICICI Pru, SBI Life, etc.) where you pay a lump sum (purchase price) and in return receive a guaranteed monthly/quarterly/annual pension for life or a fixed period. In India, the most popular annuity plan is LIC Jeevan Akshay. Annuity rates depend on your age at purchase (older = higher rate), the type of annuity chosen, and current interest rates. The pension once started is fixed (for level annuity) or increases at a pre-set rate (for increasing annuity). Annuity is commonly used by retirees to convert their retirement corpus into a steady income stream.

Is annuity income taxable in India? ▼

Yes, annuity income is fully taxable at your income slab rate under the Income Tax Act. It is classified as "income from other sources." There is no special exemption or concessional rate for annuity income. For example, if you receive ₹6,50,000 per year from an annuity and are in the 30% tax slab, you will pay ₹1,95,000 in tax on the annuity income alone. This is why many financial planners recommend combining annuity (for guaranteed income) with tax-efficient instruments like SWP from equity mutual funds (where only gains are taxed at 12.5% LTCG after 1 year).

How much of NPS goes to annuity? ▼

Per PFRDA (Pension Fund Regulatory and Development Authority) rules, at NPS maturity (age 60): minimum 40% of the corpus must be used to purchase an annuity from a PFRDA-empanelled insurer. The remaining 60% can be withdrawn as a lump sum, which is entirely tax-free under Section 10(12A) of the Income Tax Act. If you exit NPS before age 60 (early exit after 5 years), the rules are stricter: 80% must go to annuity and only 20% can be withdrawn as lump sum. If the total corpus is ₹5 lakh or less, you can withdraw the entire amount without buying annuity (Budget 2024 change).

Fixed vs increasing annuity: which is better? ▼

Fixed annuity pays a higher amount from day one but never increases. With Indian inflation averaging 5-7% per year, a fixed pension of ₹54,000/month today will feel like ₹30,000/month in purchasing power after 10 years. Increasing annuity (e.g., 3% or 5% annual increase) starts lower but grows every year, partially offsetting inflation. The break-even point is typically around year 7-10 for a 3% increase. If you expect to live 15+ years post-retirement, increasing annuity delivers more total real income. For shorter expected lifespans or if you plan to supplement annuity with other inflation-beating investments, fixed may be simpler. Many financial planners recommend a hybrid approach: buy a fixed annuity for your essential expenses floor, and invest the rest in equity mutual funds via SWP for inflation protection.

Can I change my annuity provider later? ▼

No, annuity purchase is generally irreversible. Once you buy an annuity from an insurer (LIC, HDFC Life, etc.), you cannot transfer it to another provider or surrender it for a refund (except in rare cases with heavy surrender charges during the free-look period of 15-30 days). This is why it is critical to compare rates across multiple insurers before purchasing. For NPS annuity, PFRDA provides a list of empanelled insurers and you can compare their annuity rates on the NPS Trust website. Key factors to compare: annuity rate for your age, claim settlement ratio of the insurer, option availability (joint life, return of purchase price, increasing annuity), and the insurer's financial stability. Take your time with this decision — it is permanent.

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