What makes NPS different
Unlike PPF or EPF, NPS has no guaranteed rate. It is market-linked, with a choice of equity, corporate debt and government securities, and equity capped below 75% depending on the option you select.
Its standout feature is cost. NPS fund management charges are among the lowest of any managed product anywhere — a fraction of typical mutual fund expense ratios. Over three decades that difference compounds into a very large sum, and it is a guaranteed advantage rather than a hoped-for one.
The annuity requirement, which decides the product
This is the constraint that matters most, and the most common objection.
At maturity, at least 40% of the corpus must be used to buy an annuity. Only the remaining 60% is available as a lump sum, which is tax-free. The annuity then pays a monthly pension for life.
The problem is that annuity rates in India have generally been unattractive, often in the 5–7% range, and the pension is taxable as income. So a substantial share of a corpus you spent thirty years building gets converted into an income stream at a rate you do not control and cannot renegotiate.
The calculator makes this explicit rather than reporting only the headline corpus. Adjust the annuity share and rate to see how much the outcome depends on assumptions made decades in advance.
Lock-in
NPS locks until age 60, with only narrow exceptions for specified purposes. Whether that is a feature or a flaw depends entirely on you — for someone who would otherwise dip into retirement savings, an enforced lock is genuinely valuable; for someone with discipline and a preference for flexibility, it is a real cost with no compensating benefit.
How it compares
Against PPF: NPS offers equity exposure and lower costs, but PPF's maturity is entirely tax-free with no forced annuity. Against a plain equity mutual fund: NPS is cheaper and locked; a fund is more expensive, fully flexible, and lets you keep the whole corpus.
A common approach is to treat NPS as one layer rather than the whole plan — useful for its costs and its discipline, sized so the mandatory annuity applies to a portion of your retirement assets rather than all of them.
Rules, tax treatment and annuity rates are as of August 2026 and change. Confirm current details with the PFRDA or a qualified professional.
Frequently asked questions
How much of my NPS corpus can I withdraw at 60?
Up to 60% as a tax-free lump sum. At least 40% must be used to buy an annuity that pays a monthly pension for life, and that pension is taxable as income.
What return should I assume for NPS?
NPS is market-linked with no guarantee. The return depends on your chosen allocation between equity, corporate debt and government securities, with equity capped below 75%. Around 9-11% is a common long-run assumption for an equity-tilted allocation, but it is not promised.
What is the main drawback of NPS?
The mandatory annuitisation of at least 40% of the corpus at maturity. Annuity rates in India have generally been unattractive and the resulting pension is taxable, so a large share of what you built is converted at a rate you do not control.
Is NPS better than PPF?
They do different jobs. NPS offers equity exposure and very low costs but locks until 60 and forces an annuity. PPF is fully guaranteed, entirely tax-free at maturity, and has a shorter 15-year term. Many people use both rather than choosing.