Extend NPS by 5 years, monthly pension will increase by more than 50%, old age will be spent comfortably

: NPS CalculatorNational Pension System is a pension plan of the central government, in which investment can be made keeping retirement planning in mind. Any Indian citizen (government employee or private sector employee) between the age of 18 and 70 years can open an account in the National Pension System. NRIs are also eligible for this. After opening the account, one has to contribute till the age of 60 or till maturity i.e. 70 years. If we look at the return history of NPS, till now it has given 8% to 12% annual return.

Generally, there is a trend of investing in NPS by targeting the age of 60, but if it is extended for another 5 years (Extend NPS Scheme), then the monthly pension can increase by more than 50 percent. On the other hand, if the account is extended for 10 years, then the monthly pension will increase by 130 percent. In both the cases, the lump sum amount received on retirement will also increase. However, it has to be kept in mind that there should be some source of income after the age of 60, so that you get the facility to extend this scheme.

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Calculation on investment till 60 years

Age to join NPS: 25 years
Monthly investment: Rs 10,000
Investment period: 35 years
Total investment in 35 years: Rs 42 lakh
Estimated return on investment: 8% p.a.
Total corpus at 35 years: Rs 2,30,91,751 (2.31 crore)

Investment in annuity plans: 50%
Lump Sum Value: Rs 1,15,45,875 (1.15 crore)
Pensionable Wealth: Rs 1,15,45,875 (1.15 crore)
Annuity return: 8%
Monthly pension: Rs 76,973 (about 77 thousand rupees)

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Calculation on investment till 65 years

Age to join NPS: 25 years
Monthly investment: Rs 10,000
Investment period: 35 years
Total investment in 40 years: Rs 48 lakh
Estimated return on investment: 8% p.a.
Total corpus at 40 years: Rs 3,03,42,813 (3 crores)

Investment in annuity plans: 50%
Lump Sum Value: Rs 1,75,71,407 (1.75 crore)
Pensionable Wealth: Rs 1,75,71,407 (1.75 crore)
Annuity return: 8%
Monthly pension: Rs 1,17,143 (about Rs 1.17 lakh)

Pension increased by 52% on extending it for 5 years

It is clear from the calculation that if you continue investing in the National Pension System till the age of 65 instead of 60, then the monthly pension will increase by about 52 percent (from Rs 76,973 to Rs 1,17,143).

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Calculation on investment till 70 years

Age to join NPS: 25 years
Monthly investment: Rs 10,000
Investment period: 45 years
Total investment in 45 years: Rs 54 lakh
Estimated return on investment: 8% p.a.
Total corpus at 45 years: Rs 5,30,97,035 (5.30 crores)

Investment in annuity plans: 50%
Lump Sum Value: Rs 2,65,48,518 (1.75 crore)
Pensionable Wealth: Rs 2,65,48,518 (1.75 crore)
Annuity return: 8%
Monthly pension: Rs 1,76,990 (about Rs 1.77 lakh)

Pension increased by 130% after extending it for 10 years

Calculations show that if you continue investing in the National Pension System till the age of 70 instead of 60, then the monthly pension will increase by about 130 percent (from Rs 76,973 to Rs 1,76,990).

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Tax benefits on NPS

Investment in NPS provides tax benefits under three different sections of the Income Tax Act 1961. Under Section 80 CCD(1), one gets deduction benefit on investment up to Rs 1.5 lakh in a financial year. This deduction comes under the overall limit of Rs 1.5 lakh under Section 80C.

NPS also offers additional tax exemption over and above section 80C deduction. This additional deduction is available up to Rs 50,000 under section 80 CCD(1b). Any taxpayer can avail additional deduction of up to Rs 50,000 by investing in Tier-1 accounts of NPS. In this way, any taxpayer can claim an overall tax benefit of Rs 2 lakh in a financial year by investing in NPS.

Any contribution made by the employer over and above the limit of Rs 2 lakh is eligible for deduction under section 80 CCD(2) of the Income Tax Act, 1961.