The National Pension System or NPS allows individuals to gain a sense of stability as it provides them with financial backing after retirement. It was launched in 2004 and initially, it was called the National Pension scheme. Any Indian citizen over the age of 60 is entitled to the amount that has been gathered. Individuals between the age of 18 to 60 can build up a pension corpus. Adding money into this pension scheme would allow expenses to effectively be met post-retirement. A regular monthly pension will be received by individuals after they turn 60 and they will get a lump sum amount.
What is the NPS Calculator?
This calculator allows individuals to find out the provisional sum and amount of pension that can be expected after retirement. Monthly contributions can be made and the annuity purchased as well as the rate of returns that are expected also add to this. An NPS Calculator is quite important as many people with jobs that don’t have adequate security will need to utilize it.
How can the NPS Calculator help you?
- It helps figure out the amount of money that will be given to an individual in the future. It is not a liability in any sense as it is an investment in your future. The total amount of corpus can be calculated with this tool.
- The entire amount cannot be withdrawn after retirement and 40 percent of it must be invested into annuities while the other 60 percent has to have taxes paid on it.
- It allows individuals to calculate the amount to be received as NPS has benefits related to getting higher returns than any other retirement scheme.
- It is automatic and does not have room for any kind of errors as no manual calculation of the pension amount needs to be done.
- The taxation regime which is placed on the pension funds can be evaluated and other details can be found out as well.
- It is helpful as it assists in planning for the future and in determining the pension amount.
How do NPS Calculators work?
Most pension schemes use compound interest to figure out the number of returns they are to receive and NPS is no different.
The formula that is utilized is,
A = P (1 + r/n) ^ nt
A stands for the amount.
P shows the Principal sum
r is for the rate of interest per year
n denotes the number of times the interest is compounded
t stands for the total tenure
The basic steps necessary to use the calculator are,
- The amount that is to be invested every month towards the retirement corpus needs to be entered.
- Put your current age in the field given.
- Enter the expected rate of return that you would want to have.
- In a short period of time, the results will be shown to you.
For example,
An individual invests INR 5000 per month and their present age is 50. The expected returns are 10%.
The total investment would be INR 600000 and the interest earned is INR 424225. The maturity amount would equal INR 1024225 and the minimum annuity investment would be INR 409690.
FAQs
Q1. Does the pension maturity vary between tier 1 and tier 2 cities?
Ans. No. The entire country has uniform pension rates.
Q2. Can the calculator help me figure out the amount of tax that is to be paid when withdrawing the money?
Ans. Tax implications are not calculated with this tool.
Q3. Is this calculator free for anybody to use?
Ans. Yes, this calculator is completely free for usage.
Q4. Does NPS have tax benefits?
Ans. A tax deduction of up to 10% of their gross income can be claimed with an overall maximum limit of INR 1.5 lakhs.
Q5. What is the minimum contribution amount that is under NPS?
Ans. A minimum amount of INR 500 has to be made every year in their tier 1 account and for tier 2 it is INR 1000.
Q6. Can an individual have more than one NPS account?
Ans. No. Multiple NPS accounts cannot be opened by the same individual. NPS is portable across various locations so there is no need to even have a second account.
Q7. If I don’t pay the minimum contribution amount, what will happen to my NPS account?
Ans. The account will be frozen and by visiting the POP, you can unfreeze it and pay the penalty of INR 100 along with the minimum amount required.
Q8. Is the NPS Calculator easy to use?
Ans. Yes. As long as the required details are entered, the amount can automatically be calculated and it is a completely hassle-free process.