How is NPS (National Pension Scheme) Calculated | Calculation & Pension Estimation
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National Pension Scheme or NPS is a long-term, voluntary retirement investment plan under PFRDA (Pension Fund Regulatory and Development Authority) and the Central Government. It is a contribution-based scheme where the pension amount you receive depends on the corpus you accumulate by maturity. An NPS calculator shows the corpus amount you may accumulate by maturity and the monthly pension you receive afterwards. Accordingly, you can decide on your monthly contribution.

In the following sections, you will learn more about how is NPS calculated and the workings of the NPS calculator.

NPS Calculator

The primary purpose of the NPS calculator is to calculate the maturity value or the monthly investment you must contribute to achieve your desired pension after retirement. An online calculator saves time by eliminating the need for manual calculations. Moreover, it gives you a clear idea of how much you must invest to achieve your pension goals. Consequently, you can plan your finances and investments more efficiently.

The online tool simplifies pension planning with simple online use. Calculating your pension and predicting pension amounts enhances investment planning easily. Further, you can use the calculator online straightforwardly and know the amount invested, NPS interest rates, returns, total funds at maturity, etc. Most importantly, thanks to its user-friendly interface, anyone planning to invest in NPS can use an NPS calculator.

How is the National Pension Scheme (NPS) Calculated?

The basic formula to calculate NPS is: A = P (1 + r/n) ^ nt

In the formula, P = Principal Sum, A = Amount, r = Rate of interest, n = instances of interest compounding, and t = number of years

Apart from your contributions to the NPS scheme, your employer's contribution applies if you are a salaried employee. If you make a monthly contribution of 10% of your salary to the NPS scheme, the employer will also match the amount and contribute to it. You can use the NPS calculator to determine how much pension will I get from NPS.

NPS returns you receive largely depend on the underlying assets' performance. These include equity, corporate bonds, government securities, alternative assets, etc. Fund managers allocate your NPS investment in these assets based on your allocation. Market conditions influence these assets, leading to an increase or decrease in value. That means when their value increases, your NPS investment also increases. Hence, the NPS returns you receive upon retirement are difficult to predict. However, comparing the assets’ past performance helps estimate the expected returns by maturity.

Formula for NPS Calculation

As mentioned earlier, the basic formula to calculate NPS is A = P (1 + r/n) ^ nt where P = Principal Sum, A = Amount, r = Rate of interest, n = instances of interest compounding, and t = number of years.

According to the PFRDA rules, central and state government employees automatically receive NPS contributions from their employers. However, in the case of a corporate sector employee, the contributions entirely depend on the employer’s will. Employers in the government sector may receive the maximum employer contribution of 14% of their salary. Corporate sector employees may receive a contribution of 10% of their salary for NPS.

Since the returns you receive largely depend on the asset classes selected for investment, you must keep an eye on their performance and adjust your allocations accordingly.

Here is an example of how is NPS calculated:

Mohit, aged 36, may invest Rs 10,000 per month until retirement at 60. So, he has an investment horizon of 24 years. With a projected return rate of 7%, the NPS calculator will deliver the following results:

Total Investment= Rs 28.8 Lakh

Maturity Amount= Rs 74.8 Lakh

Lumpsum Amount at the age of 60 Years= Rs 44.9 Lakh

Pension Wealth at the age of 60 Years= Rs 29.9 Lakh

Monthly Pension= Rs 14,965

Understanding NPS Returns

NPS contributions have allocations in four asset classes: equity, government bonds, corporate bonds, and alternative assets. Since the earnings depend upon the performance of these assets, the proportion of asset allocation across these classes largely impacts the NPS returns. Additionally, the earlier you start investing, the higher your pension amounts and retirement corpus will be. An NPS calculator predicts the returns based on your age, monthly contributions, and investment scheme. Input the variables correctly to estimate the expected NPS returns.

PFRDA regulates NPS through transparent investment guidelines, regular performance reviews and monitoring. With regular monitoring, asset managers can invest in assets with the highest return potential, maximising the benefits of NPS investments.

NPS Components

NPS is a market-linked investment scheme that lets you invest in various asset classes, including stocks, government bonds, corporate bonds, and alternative assets. If a government employee invests in the NPS scheme, the employer also contributes a matching amount to their account to help build a corpus. For private employees, the decision about a contribution is entirely upon the employer. Employers receive attractive tax benefits for their contributions.

You can open two types of NPS accounts: Tier I and Tier II. While Tier I is a mandatory NPS account, Tier II is a voluntary account associated with the individual’s PRAN. Unlike a Tier I account, a Tier II account is more flexible, and the account holder can withdraw from it whenever required.


NPS is a lucrative investment plan regulated by the PFRDA. National Pension System Trust is the registered owner of assets under this investment scheme. Open to all Indian citizens, the scheme is extremely valuable for anyone working in the private sector, as it assures a regular pension post-retirement. Moreover, it offers attractive tax advantages under Section 80C and Section 80CCD (1B). You can find more information about the scheme or open an NPS account at

Frequently Asked Questions

1. How is NPS calculated from salary?

NPS should be 10% of your basic salary + dearness allowance as per section 80CCD (2) with overall capping of Rs. 750,000 (including Employer PF + SAF )

2. How many years will NPS pay pension?

NPS pension is payable for life at a uniform rate.

3. Can I invest more than 50000 in NPS?

You can invest up to Rs. 2 Lakh in an NPS Tier 1 account and claim a tax deduction on the full amount.

4. How much should I invest in NPS to get 50000 monthly?

If you start contributing to the NPS scheme at 40 years of age, your total investment horizon would be 20 years, and you must invest Rs 33,000 monthly for 20 years to receive a monthly pension of Rs 50,000.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.