NPS Pension Calculator:Generally, there is a trend to invest in the National Pension System by making a target till the age of 60, but if we extend it for 2 more years (Extend NPS Scheme) i.e. let it mature at 62 instead of 60, then Monthly pension may increase by more than 22 percent. On the other hand, if the account is extended by 2 more years i.e. let it mature in 64 years instead of 62, then the pension will increase by 22 percent. On extending, the lump sum amount will also increase by the same ratio. However, it has to be kept in mind that after the age of 60 years, there should be some source of income, so that you get the facility to extend this scheme.
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NPS: Government Pension Scheme
NPS is a pension scheme of the Central Government, in which investments can be made keeping retirement planning in mind. Any Indian citizen (government employee or private sector employee) between the age of 18 years to 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 years or till maturity i.e. 75 years. If we look at the return history of NPS, till now it has given 8% to 12% annual returns.
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Calculation on investment for 60 years
Age to join NPS: 25 years
Monthly investment: Rs 5,000
Investment period: 35 years
Total investment in 35 years: Rs 21,00,000
Estimated return on investment: 10% per annum
Total corpus at 35 years: Rs 1,91,41,384 (1.91 crore)
Investment in annuity plan: 40%
Lump Sum Value: Rs 1,14,84,830 (1.15 crore)
Pensionable Wealth: Rs 76,56,554 (about Rs 77 lakh)
Annuity return: 7 percent
Monthly pension: Rs 44,663 (about Rs 45 thousand)
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Calculation on investment for 62 years
Age to join NPS: 25 years
Monthly investment: Rs 5,000
Investment period: 35 years
Total investment in 37 years: Rs 22,20,000
Estimated return on investment: 10% per annum
Total corpus at 37 years: Rs 2,34,93,308 (2.35 crore)
Investment in annuity plan: 40%
Lump Sum Value: Rs 1,40,95,985 (1.41 crore)
Pensionable Wealth: Rs 93,97,323 (about Rs 94 lakh)
Annuity return: 7 percent
Monthly pension: Rs 54,818 (about Rs 55 thousand)
Pension increased by 52% after extending it for 2 years
It is clear from the calculation that if we continue investing in the National Pension System till the age of 62 years instead of 60 years, then the monthly pension is increasing by about 22 percent. It increased from Rs 44,663 to Rs 54,818. Whereas if extended for 2 more years then the pension will be Rs 67,210. Which is 22 percent more than Rs 54818.
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Tax benefit on NPS
Tax benefits on investment in NPS are available under three different sections of the Income Tax Act 1961. Under Section 80 CCD(1), deduction benefit is available on investments 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 gets the benefit of additional tax exemption on top of Section 80C deduction. This additional deduction up to Rs 50,000 is available under Section 80 CCD(1b). Any taxpayer can avail additional deduction 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 above the limit of Rs 2 lakh will be eligible for deduction under Section 80 CCD (2) of the Income Tax Act 1961.
