Is NPS withdrawal taxable?

The lump sum withdrawal from NPS (60% at age 60 or 20% at premature exit) is entirely tax-free under Section 10(12A). The annuity pension received from the mandatory annuity purchase is fully taxable at your income slab rate as 'income from other sources.' There is no special exemption for annuity income. Partial withdrawals (up to 25% of own contributions for specific purposes, max 3 times) are also tax-free.

What are the NPS annuity options and rates?

PFRDA-empanelled insurers offer several annuity options: Life Annuity (highest rate ~6.5-7.5%, stops at death), Life with Return of Purchase Price (~5.5-6.2%, corpus returned to nominee), Joint Life Annuity (~6.0-6.7%, continues to spouse), and Annuity with Guaranteed Period of 10 or 15 years. Rates depend on your age (older = higher), the insurer, and current interest rates. LIC Jeevan Akshay is the most popular choice.

NPS Withdrawal Calculator India — FY 2025-26

Q: How much of NPS can I withdraw as lump sum at 60?

At age 60, you can withdraw up to 60% of your NPS corpus as a tax-free lump sum under Section 10(12A) of the Income Tax Act. The remaining 40% must be used to purchase an annuity from a PFRDA-empanelled insurer (LIC, SBI Life, HDFC Life, etc.). If your total NPS corpus is ₹5 lakh or less, you can withdraw 100% as lump sum without buying any annuity.

Q: Can I defer NPS withdrawal beyond age 60?

Yes, you can defer NPS withdrawal until age 75. During deferral, your corpus continues to grow market-linked. You can also make a partial lump sum withdrawal at 60 and defer the rest. Deferring is beneficial because: (1) corpus grows larger, (2) annuity rates are higher at older ages, and (3) you get more time for market-linked growth. You can continue contributing during deferral as well.

Calculate your NPS lump sum and monthly pension at retirement. Understand the 60/40 split at age 60, compare annuity options from PFRDA-empanelled insurers (LIC, SBI Life, HDFC Life), and see the financial impact of early exit vs waiting. Updated with PFRDA rules and Budget 2025 changes.

Calculate your NPS lump sum and monthly pension at retirement (age 60-75)

NPS corpus at maturity

₹

Total NPS corpus at exit (Tier I). Check your NPS statement or use our NPS Calculator.

Exit age

years

Normal exit: 60. Can defer until 75 for higher corpus and better annuity rates.

Annuity type

Choose from PFRDA-empanelled insurer options. Life Annuity pays highest; Return of Purchase returns corpus to nominee.

Annuity rate

Auto calculates based on age and type. Use custom if you have a specific quote from an insurer.

—

Try another scenario

How to Use This Calculator

NPS at 60 tab

Enter your NPS corpus at maturity (check your NPS statement or use the NPS Calculator to project it) and your exit age (default 60, deferrable to 75). The calculator applies the PFRDA 60/40 rule: 60% as tax-free lump sum and 40% as mandatory annuity. It calculates monthly pension based on the annuity type and rate. For corpus ≤₹5 lakh, it shows the full withdrawal option. It also displays what-if scenarios for different annuity allocation percentages (40%, 50%, 60%, 80%, 100%).

Annuity Options Comparison tab

Enter the same corpus and see all five annuity options compared side by side: Life Annuity (highest rate, stops at death), Life with Return of Purchase Price (lowest rate, corpus returned to nominee), Joint Life (continues to spouse), Guaranteed 10-Year, and Guaranteed 15-Year. Each option shows gross pension, tax deduction, and net monthly income at your slab rate.

Early Exit vs Wait tab

Enter your current age, current NPS corpus, monthly contribution, and the age you want to exit early. The calculator projects your corpus at the early exit age and at age 60, and compares the 20/80 premature exit split against the 60/40 normal retirement split. It shows the massive difference in lump sum and pension between exiting early and waiting. A projection table shows corpus and pension at every 5-year interval from your early exit age to 65.

Share your result

All inputs are encoded in the URL. Click Share to send your exact NPS withdrawal scenario to a financial advisor, family member, or bookmark it for later.

The Formula

NPS withdrawal amounts are determined by PFRDA rules, not a single formula. The key calculations:

Normal Exit at Age 60:
Lump Sum = NPS Corpus × 60% (tax-free under Section 10(12A))
Annuity Purchase = NPS Corpus × 40% (mandatory minimum)

Premature Exit (before 60, after 5 years):
Lump Sum = NPS Corpus × 20% (tax-free)
Annuity Purchase = NPS Corpus × 80% (mandatory)

Small Corpus Exception:
If corpus ≤ ₹5,00,000 at age 60: 100% lump sum (no annuity required)
If corpus ≤ ₹2,50,000 at premature exit: 100% lump sum

Monthly Pension from Annuity:
Annual Pension = Annuity Corpus × Annuity Rate / 100
Monthly Pension = Annual Pension / 12

Corpus Projection (for Early Exit tab):
FV = Current Corpus × (1 + r)ⁿ + PMT × [((1 + r)ⁿ − 1) / r]
where r = monthly return, n = months, PMT = monthly contribution

Partial Withdrawal (during accumulation):
Maximum = 25% of own contributions (not employer)
Frequency: up to 3 times during NPS tenure
Tax: Entirely tax-free

The annuity rate depends on your age, the type of annuity chosen, and the insurer. Rates shown are approximate based on LIC Jeevan Akshay and comparable plans.

Example

Priya — NPS corpus of ₹80 lakh at age 60

Priya (60) has accumulated ₹80,00,000 in her NPS Tier I account. She wants to understand her lump sum and monthly pension options. She is in the 30% tax slab under the new regime.

Step 1: NPS 60/40 split

NPS corpus₹80,00,000

Lump sum (60%)₹48,00,000 (tax-free)

Annuity purchase (40%)₹32,00,000

Step 2: Monthly pension (Life Annuity at 6.5%)

Annuity rate6.5% p.a.

Annual pension₹2,08,000

Monthly pension (gross)₹17,333

Tax at 30% slab₹5,200/month

Net monthly pension₹12,133

Step 3: What if Priya had exited early at age 50?

Corpus at 50 (projected)₹30,00,000

Premature exit split20/80 (instead of 60/40)

Lump sum (20%)₹6,00,000

Annuity (80%)₹24,00,000

Monthly pension (6.5%)₹13,000

By waiting until 60, Priya gets ₹48L lump sum vs ₹6L and a pension from a larger corpus with a better split ratio. The impact of waiting is dramatic: 8x more lump sum and a higher pension despite a lower annuity allocation percentage.

NPS Withdrawal Rules at a Glance

Normal Exit at Age 60 (Superannuation)

60% lump sum — entirely tax-free under Section 10(12A)
40% mandatory annuity — must buy from PFRDA-empanelled insurer
Can allocate more than 40% to annuity voluntarily (for higher pension)
If corpus ≤ ₹5 lakh: 100% withdrawal, no annuity required
Can defer exit until age 75 — corpus keeps growing market-linked

Premature Exit (Before Age 60)

Minimum 5 years of contributions required
20% lump sum (tax-free) + 80% annuity (mandatory)
If corpus ≤ ₹2.5 lakh: 100% withdrawal allowed
No exit allowed before 5 years (except death or permanent disability)

Partial Withdrawal (During Accumulation)

Maximum 25% of your own contributions (not employer's share)
Only for specified purposes: children's education/marriage, home purchase, medical treatment, disability, skill development
Maximum 3 partial withdrawals allowed during NPS tenure
Must have completed at least 3 years of contributions
Entirely tax-free

Death of Subscriber

100% of corpus paid to nominee/legal heir
No mandatory annuity purchase required
Nominee can choose lump sum or annuity or combination
Lump sum to nominee is tax-free

Deferral Option (Age 60-75)

Can defer NPS exit from age 60 to age 75
Corpus continues to grow market-linked during deferral
Can make partial lump sum withdrawal at 60 and defer annuity purchase
Annuity rates are typically higher at older ages (better pension per rupee)
Can continue making contributions during deferral

FAQ

How much of NPS can I withdraw as lump sum at 60? ▼

At age 60 (normal superannuation), you can withdraw up to 60% of your NPS corpus as a tax-free lump sum under Section 10(12A) of the Income Tax Act. The remaining 40% must be used to purchase an annuity from a PFRDA-empanelled insurer. If your total NPS corpus is ₹5 lakh or less, you can withdraw the entire 100% as lump sum with no annuity purchase required. You can also voluntarily allocate more than 40% to annuity if you want a higher monthly pension.

What happens if I exit NPS before age 60? ▼

Premature exit from NPS (before age 60, after minimum 5 years of contributions) is allowed but with stricter rules: only 20% can be withdrawn as a tax-free lump sum, and 80% must be used to purchase an annuity. This is a much worse split compared to 60/40 at normal retirement. If the corpus is ₹2.5 lakh or less at premature exit, 100% withdrawal is allowed without annuity. No exit is permitted before completing 5 years of contributions, except in cases of death or permanent disability. This severe penalty makes premature exit very costly.

Is NPS lump sum and pension taxable? ▼

Lump sum: Tax-free. The 60% lump sum at age 60 (or 20% at premature exit) is entirely exempt from income tax under Section 10(12A). Annuity pension: Fully taxable. The monthly pension received from the mandatory annuity purchase is taxable at your income slab rate as "income from other sources." There is no special exemption or lower rate for NPS annuity income. Partial withdrawals during the accumulation phase (25% of own contributions, max 3 times) are also tax-free.

Which annuity option should I choose for NPS? ▼

The best annuity option depends on your priorities. Life Annuity pays the highest rate (6.5-7.5%) but pension stops at your death — choose this if you have other provisions for your family. Joint Life Annuity (6.0-6.7%) continues pension to your spouse after your death — recommended if your spouse has no independent income. Life with Return of Purchase Price (5.5-6.2%) has the lowest rate but returns your full corpus to nominees at death — good for wealth transfer. Guaranteed Period options ensure pension for at least 10 or 15 years regardless of survival. Compare rates across PFRDA-empanelled insurers (LIC, SBI Life, HDFC Life, ICICI Prudential) before deciding.

Can I defer NPS withdrawal beyond age 60? ▼

Yes, you can defer NPS withdrawal until age 75. During deferral, your corpus continues to grow market-linked. You can also take a partial lump sum at 60 and defer the annuity purchase. Deferring is beneficial for three reasons: (1) your corpus grows larger with market returns, (2) annuity rates are higher at older ages (e.g., 7.0% at 65 vs 6.5% at 60 for life annuity), and (3) you get more time for compounding. You can also continue making NPS contributions during the deferral period. This is especially useful if you have other income sources from 60-65.

Related Calculators

Add This Calculator to Your Website

Embed the sum.money NPS Withdrawal Calculator on your site. Free, responsive, always up-to-date.