Short answer. NPS gives two tax breaks. Your employer's contribution is deductible in both regimes, up to 14% of basic plus DA in the new regime. Your own extra ₹50,000 counts only in the old regime. At 60, up to 60% of the corpus comes out tax-free, and above ₹12 lakh private-sector subscribers must annuitise at least 20%.
The calculator
Building wealthTwo halves. What your NPS could grow to by 60 and what the exit rules let you take. Then what NPS saves you in tax this year, in each regime. The maths runs on this page and nothing is sent anywhere.
Our calculation. Corpus: contributions at the start of each month, raised once a year, one steady return. Exit: the NPS Trust's normal-exit rules at 60 and the 60% tax-free lump sum. Tax: the same engine as our old vs new regime calculator, comparing your pay with NPS against the same pay without it (your employer's share paid to you as salary instead). NPS Trust and your Form 16 are the final word.
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The two NPS deductions
The methodPeople talk about "the NPS tax benefit" as one thing. It's two, and they behave differently by regime.
Your employer's contribution is deductible in both regimes, up to 14% of basic plus DA in the new regime and 10% in the old (14% for government). If your company offers it, moving part of your pay into employer NPS lowers your taxable income even in the new regime.
Your own extra ₹50,000 is deductible only in the old regime. In the new regime it saves nothing this year. It still builds your retirement money, but the tax pitch doesn't apply.
At 60, the other half of the story: up to 60% of the corpus comes out tax-free. If your corpus is above ₹12 lakh and you're not a government employee, you can take up to 80% as a lump sum now, but the slice above 60% is taxed at your slab.
Worked examples
Your assumptions| Case | Result |
|---|---|
| Age 30, ₹12,000 a month (₹5,000 yours, ₹7,000 employer), up 5% a year, 10% return | ₹3.98 crore at 60; ₹92 lakh in today's rupees at 5% inflation |
| ₹1 crore corpus, private sector, take the most allowed | ₹80 lakh lump sum (₹60 lakh tax-free, ₹6.24 lakh tax on the rest at a 30% slab); ₹20 lakh for a pension of ₹10,000 a month at 6% |
| ₹18 lakh salary, basic ₹8 lakh, employer NPS ₹84,000, own ₹50,000 | Saves ₹34,944 in the new regime and ₹66,768 in the old; the new regime is still cheaper overall |
Illustrative, our calculation. Returns and annuity rates are assumptions, not forecasts. No fund manager or insurer named.
Get the sheet
FreeNPS corpus and exit sheet
Questions people ask
Tax year 2026-27Is NPS deductible in the new tax regime?
Only your employer's contribution, up to 14% of basic plus DA. Your own contributions, including the extra ₹50,000, are deductible only in the old regime. Source: Income-tax Act, 2025, section 124.
How much can I withdraw from NPS at 60?
If the corpus is up to ₹8 lakh, all of it. Between ₹8 and ₹12 lakh, up to ₹6 lakh as a lump sum. Above ₹12 lakh, at least 20% must buy an annuity (40% for government subscribers), so up to 80% can come out. Source: NPS Trust, Normal exit.
Is the NPS lump sum tax-free?
Up to 60% of the corpus is. If you take more, say 80%, the part above 60% is taxed at your slab under the current Act. Source: Income-tax Act, 2025, Schedule II.
What is the ₹7.5 lakh limit on employer NPS?
Your employer's contributions to PF, NPS and superannuation together are tax-free up to ₹7.5 lakh a year. Anything above that is taxed as a perk. Source: Income-tax Act, 2025, section 17(1)(h).
How much will my NPS be worth at 60?
It depends on what you put in, for how long, and the return. ₹12,000 a month from 30, raised 5% a year, at an assumed 10%, is about ₹3.98 crore at 60, or ₹92 lakh in today's money at 5% inflation. Our calculation; returns aren't guaranteed.
The rules this uses
Last verified 21 Oct 2026Every rule comes from these official pages. NPS exit rules changed in December 2025 and may change again, so we re-check them every quarter and on Budget day, and log any change on our corrections page.
| Rule | Official source |
|---|
Known limits
Read these first- Normal exit at 60 only. Not early exit, partial withdrawals, or staying invested past 60.
- We apply the 60% tax-free limit to every lump sum, as the Act reads today, including a full withdrawal from a small corpus. Check before you withdraw.
- The pension (annuity) is added to your income in the years you receive it. Annuity rates depend on the insurer, the type of annuity and rates at the time.
- Employer contributions to PF, NPS and superannuation above ₹7.5 lakh a year are taxable as a perk. The tool flags it but doesn't add that tax.
- No surcharge (above ₹50 lakh of income).
Tested against 21 cases: projections checked with a separate closed-form calculation, exit bands and tax worked by hand (v1.0, 21 October 2026).
Education only. This newsletter is for education only. It is not investment, tax or legal advice and does not recommend any security or product. Do your own research or consult a registered professional.