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NPS Calculator
After retirement, pension becomes one of the major earning sources for many in India. However, with inflation on the rise, whether the pension you are going to receive will be enough or not, or how much pension will be enough needs analysis. Here the nps calculator comes in which can help in calculating the pension that you can earn every month after your retirement and help in your retirement planning.
This article will cover different aspects of the National Pension System calculator, from its underlying formula to the process you need to follow to use the calculator, the benefits of using this calculator and a lot more. Since retirement planning is one of the crucial parts of the financial planning process, thus this calculator is also one of the integral parts of the process.
What is a National Pension Scheme Calculator?
National Pension Scheme or National Pension System (NPS), are the two names of the pension scheme offered by the central government in India. This scheme is for all the citizens of the country who wants to invest for their life after retirement to be financially stable and fruitful.
National Pension System is one of the very few government investment schemes that have a link to the financial markets. The scheme invests in the stock market and other financial markets to generate returns on the funds invested by the investors. This is one of the reasons, NPS offering higher returns than other government schemes over the years.
Now coming to the National Pension Scheme Calculator can be regarded as an online tool that helps in calculating the pension amount that you can receive if you invest a certain amount in this scheme for a certain period.
The calculator helps you estimate the total amount that you can accumulate plus the monthly pension. So, you can get a complete idea about the funds you can have after retirement from this scheme. Now let’s see, how you can use this calculator to find out these estimates.
How Does the National Pension Scheme Calculator Work?
NPS pension calculator is one of the simplest online calculators, where you need to enter the amount you want to invest in the National Pension System every month, suppose it is Rs. 5000 and now your age is 25 and the return you expect is around 8%. So, the maturity amount (lump sum) that you will receive from this scheme is Rs. 1.15 crores where your investment would be just Rs. 21 lakhs. So, Rs. 94.46 lakh crores would be your gain.
Now you can see how much pension you can earn every month by changing the amount you want to put into the annuity. Suppose, you want to buy an annuity worth 50% of the maturity amount, then your lump sum amount remaining in the NPS account would be Rs. 57.73 lakhs while your monthly pension would be Rs. 28865 approximately.
Now you change the amount you want to invest and check how much you can generate with different investment amounts. Similarly, you can change the expected return from the investment according to the asset class you have chosen for your NPS investment. Also, age matters a lot in generating a higher sum of money. The younger you are, the more money you can generate as you have more years to reach the age of retirement.
Who Can Use the National Pension Scheme Calculator?
National Pension System is for all the citizens of India who are within the age group of 18 years to 60 years and if they comply with the KYC requirements of the scheme where they need to submit certain ID proofs. There are no other eligibility criteria for the NPS scheme. So, if you are eligible for investing in this scheme, you can use the NPS return calculator as well. However, the NPS calculator can be used by anyone who knows how to use and interpret online calculator results. There are no eligibility criteria for using the calculator. So, if you are below the age of 18 years, and you want to help your parents estimate their returns from NPS, you can also use the calculator.
Characteristics of the National Pension Scheme Calculator
There are different features of the National Pension Scheme Calculator which include the following –
Investment amount
It is the amount that you want to deposit in the scheme every month or in a year. You can change this amount as many times as you want while using the calculator to check the maturity amount from the scheme. As and when this amount is changed, the total maturity amount will change instantly.
Rate of return
You can select any rate of return that you think your investment will earn from NPS. It should depend on your choice of asset class for NPS investment. You can change the return as well multiple times to check how the maturity amount gets affected by the same and accordingly chose the asset class of NPS investment.
Annuity purchase
You can also use this calculator to figure out how much you should invest in an annuity to generate a certain amount of pension per month after the maturity of the scheme.
Merits of Using the National Scheme Pension Calculator
NPS Calculator India makes the life of NPS account holders and people who are interested to invest in this scheme by –
Making the calculation of the maturity amount and the pension per month they can earn
Helping them compare the return rates of different underlying assets that they can choose
Saves time as manual calculation of NPS maturity amount can be tedious
Providing a simple and user-friendly interface which helps everyone even with minimum tech knowledge to use this NPS return calculator
You can also use the calculator to check how much you need to invest in the NPS scheme every month to achieve a particular retirement corpus
Ways the National Pension Scheme Can Help You
National Pension System is one of the few government savings and investment schemes that invest in the financial markets and thus, it is one of the best ones for retirement planning. This scheme not only helps in accumulating a huge retirement corpus but also helps you save taxes at present. Yes, under section 80C of the income tax act, you can save up to Rs. 1.5 lakhs invested in this scheme in a financial year. Tier I investors of this scheme can save Rs. 50000 additionally over and above Rs. 1.5 lakhs. This is according to the rule of section 80 CCD (1B) of the same IT Act.
Moreover, this is one such scheme where you can choose the underlying assets of your choice. If you want to take the risk, you can choose equities to be the underlying asset for your NPS scheme, while if you are looking to generate moderate return then you can go for hybrid or debt instruments as the underlying assets.
You can invest in this scheme from the age of 18 which is another benefit. The earlier you start investing, the more corpus you can accumulate till the age of 60 when the scheme will mature.
Another added benefit is that a portion of the maturity amount can be used for annuity purchases which will generate the monthly pension. You can also take the lump sum maturity amount, it is at your discretion how you want to withdraw the retirement corpus from the NPS scheme after maturity.
Conclusion
Whether you are planning for retirement, thinking of changing your company or joining a company, make sure, you are aware of the gratuity amount that you will be entitled to or at least a rough estimation. This will not only help you in your retirement planning, or choosing a job but also help you in achieving certain financial goals.
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FAQs on NPS Calculator
What is the rate of return on NPS?
The rate of return on NPS is not fixed as it is a market-linked investment scheme. However, the average varies between 9% and 12% in a year.
How much can I save in taxes by investing in NPS?
You can save up to Rs. 1.5 lakhs in a financial year for investing in NPS as per section 80C of the Income Tax Act, 1961. If you are an NPS Tier I investor, then you can save Rs. 50000 more as per section CCD (1B) of the IT Act.
How much do I need to invest every month in the NPS scheme?
The minimum amount varies as per the Tier of the NPS scheme. For opening a Tier I NPS account, you would need Rs. 500 as the minimum while for Tier II, it is Rs. 1000. The minimum yearly contribution to a Tier I account is Rs. 1000 while for Tier II, there are no such minimum investment criteria.
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Disclaimer
*For 30 Year Old Male, , Endowment Plan Option, online purchase of policy excluding underwriting extra premium & GST.