Your plan
₹10,000 a month at 35, rising 5% every year, for 25 years. Total paid in: about ₹57,27,252. At an assumed 10% a year the corpus at 60 is about ₹2,00,79,082.
20% or 40% annuity?
| 20% annuity | 40% annuity | |
|---|---|---|
| Annuity purchase | ₹40,15,816 | ₹80,31,633 |
| Monthly pension at 6% | ₹20,079 | ₹40,158 |
| Lump sum | ₹1,60,63,265 | ₹1,20,47,449 |
| … of which taxable | ₹40,15,816 | ₹0 |
With a 40% annuity the whole lump sum stays within the 60% tax-free limit, and the pension doubles. With 20% you get more cash up front but ₹40,15,816 of it is taxable. There is no right answer — it depends on your other pensions (EPF/EPS, rent, family support) and on how comfortable you are managing a lump sum yourself.
About annuity rates
Annuity rates depend on your age, the type (life only, with return of purchase price, joint life) and interest rates when you retire. A life annuity with return of purchase price pays less, but your family gets the capital back. The 6% used here is a middle-of-the-road assumption; check quotes from PFRDA-empanelled insurers when you get close to 60.
Inflation, honestly
A pension of ₹40,158 a month in 2051 will buy much less than it would today — at 5% inflation, roughly a quarter. That is why the lump sum, invested sensibly, and the step-up matter so much.
Putting the pension in context
Most salaried people will have more than one source of retirement income: the NPS annuity, an EPF lump sum, an EPS pension, rent or interest. When you decide on the annuity share, think about what your fixed monthly costs will be and how much of them should be covered by income that lasts for life. The annuity is that guaranteed part; the lump sum is your flexible reserve for health costs, travel or helping family.
You can also delay: NPS now lets you stay invested until 85 and defer the lump sum or the annuity purchase. Deferring the annuity by a few years usually buys a higher rate, because you are older when you buy. And remember the step-up: raising ₹10,000 by 5% a year means about ₹32,000 a month by year 25, which is where most of the growth comes from.
Key NPS figures (checked 5 November 2026)
| Item | Figure |
|---|---|
| Lump sum at 60 (corpus above ₹12 lakh) | Up to 80%; at least 20% annuity |
| Corpus ₹8–12 lakh | Up to ₹6 lakh lump sum |
| Corpus up to ₹8 lakh | 100% lump sum allowed |
| Tax-free share of corpus | 60% |
| Employer contribution deduction (new regime) | Up to 14% of basic + DA |
| Employer PF + NPS + super tax-free cap | ₹7.5 lakh a year |
FAQ
How much pension for ₹10,000 a month in NPS?
Starting at 35 with a 5% yearly step-up and 10% returns, the corpus is about ₹2,00,79,082; a 40% annuity at 6% pays about ₹40,158 a month.
How much will I invest in total?
About ₹57,27,252 over 25 years with a 5% yearly increase.
Is a 40% annuity better than 20%?
It gives double the pension and keeps the whole lump sum tax-free (within 60%), but less cash at 60.
Sources (checked 5 November 2026): PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025 (December 2025; reported by Business Today, Upstox and Value Research); Income-tax Act provisions on NPS — 60% exemption of lump sum (s.10(12A) of the 1961 Act, continued in the 2025 Act), 80CCD(1), 80CCD(1B), 80CCD(2) at 14% in the new regime; Finance Act 2026. Returns are assumptions, not PFRDA data.