NPS Calculator

NPS offers tax benefits under multiple sections. Under Section 80CCD(1), you can claim deduction up to 10% of salary (for salaried) or 20% of gross income (for self-employed), within the ₹1.5 lakh limit of Section 80C. Additionally, Section 80CCD(1B) provides an exclusive ₹50,000 deduction over and above 80C. Employer contributions up to 10% of salary (14% for government employees) are also tax-deductible under 80CCD(2) without any upper limit.

For NPS Tier-I (main retirement account), the minimum initial contribution is ₹500, and the minimum per contribution thereafter is ₹500. You must contribute at least ₹1,000 per year to keep the account active. For Tier-II (voluntary savings), the minimum contribution is ₹250. There is no upper limit on contributions to either tier.

Your NPS pension depends on your corpus at retirement and the annuity rate offered by insurance companies. At retirement, you must use at least 40% of your corpus to buy an annuity (pension plan). The remaining 60% can be withdrawn as a tax-free lump sum. For example, if your corpus is ₹1 crore and you use 40% (₹40 lakh) to buy an annuity at 6% annual return, you would receive approximately ₹20,000 per month as pension.

Partial withdrawal from NPS Tier-I is allowed after 3 years of account opening for specific purposes like children's education, marriage, home purchase, or medical treatment. You can withdraw up to 25% of your own contributions (not including employer contributions or returns). Complete withdrawal before 60 is possible after 5 years, but you must use 80% for annuity purchase. NPS Tier-II has no withdrawal restrictions.

TallyPrime simplifies NPS contribution management for businesses through its payroll module. Employers can set up automatic NPS deductions from employee salaries, track both employee and employer contributions separately, and generate accurate salary slips showing NPS deductions. The software also helps with Form 16 generation that correctly reports NPS contributions for tax purposes, and maintains records for employer NPS contribution claims under Section 80CCD(2).