March 27, 2026

NPS Returns and How to Check/Calculate: Scheme, Rate, Tier 1, & Tier 2

NPS returns

A National Pension System (NPS) scheme is a kind of voluntary savings scheme wherein subscribers contribute money towards it and plan for retirement through pensions upon maturity.

Since a lot of Indians fail to prepare for their retirement and face hard times in arranging funds post-retirement, NPS provides them with a sustainable solution to the problem.

When the scheme matures, a portion of the accumulated money goes into purchasing annuities through which the retired person can receive monthly pensions. Also, the subscriber can withdraw a maximum of 60% of their accumulated amount as lump sum.

This retirement scheme is managed and regulated by Pension Fund Regulatory and Development Authority (PFRDA).

Eligibility

To be eligible for the scheme, investors must be between 18 to 70 years of age. And everyone subscribing should comply with the KYC standards.

How to calculate NPS returns?

As we know, returns of the NPS scheme are linked to markets and depend on the performance of underlying investments or assets.

To calculate the NPS returns, you can use an online calculator. You will have to fill in all your details, such as monthly payments, your age, the type of scheme, and your expected interest rate of the scheme. The NPS calculator will be able to tell you the total corpus you'd be able to accumulate and the pension you'll be receiving upon maturity, i.e. post-retirement.

Let's understand it better with an example.

Let's say you are a 30-year-old individual interested in subscribing to the NPS scheme. You decide to invest ₹5,000 monthly and want to retire at the age of 60. Let's assume that the average rate of return of the scheme is 10%.

Now, by the time you turn 60, you'd have contributed around ₹18 lahks towards the scheme. Total interest earned at 10% average rate would be ₹94 lahks.

The total corpus generated would be somewhere around ₹1.1 crores.

Now, let's suppose that you want to withdraw 60% of the corpus at the start of retirement. The rest 40% would go towards annuities.

This means you'd withdraw around ₹68 lakhs, and your monthly pension would come out to be around ₹22,793 if we consider an annuity rate of 6%.

NPS returns

Here’s the range of returns given by the different NPS Accounts

NPS returns for Tier l Accounts

Asset class	1 year returns	5- year returns	10-year returns
Equity	4.93% - 7.02%	10.82%-12%	12.64 - 12.94%
Government Bonds	2.43%- 3.08%	7.63% - 8.65%	8.27% - 8.60%
Corporate Bonds	2.78% - 3.48%	7.00% - 8.10 %	8.51% - 9.01%
Alternative Assets	4.45% - 8.85%	6.40% - 9.04%	NA

NPS returns for Tier 2 Accounts

Asset class	1 year returns	5-year returns	10-year returns
Equity	5.11% - 7.61%	10.82%-11.94%	12.69% - 13%
Corporate Bonds	2.83%- 3.47%	7.31% - 7.99%	8.41%-8.90%
Government Bonds	2.34% - 3.03%	7.62% - 9.09%	8.31% - 8.58%
Tax saving scheme	3.25% - 6.86	NA	NA

NPS taxation benefits

For employees' and their employers' contributions towards the scheme, a deduction of ₹1.5 lakhs can be claimed.

For salaried people: Under section 80CCD (1), salaried people can claim up to 10% of their salary. Additionally, ₹50,000 can be invested to claim tax deductions under section 80CCD (1B).

For self-employed individuals: Self-employed individuals can claim up to 20% of their gross incomes. A maximum of ₹1.5 lakhs is allowed for tax deduction under section 80CCD (1).

Additionally, ₹50,000 can be invested to claim tax deductions under section 80CCD (1B).

Benefits of the NPS scheme

Cost-effective: It is one of the most affordable schemes available to plan for retirement with low maintenance and administration charges.
Flexibility: NPS scheme offers investors flexibility in terms of the type of fund they wish to opt for.
Portability: Subscribers can contribute towards the scheme from anywhere in the country. No matter which POP-SP branch subscribers are registered with, contributions can be made through any of the POP-SPs. Online payment is also available.

Types of NPS accounts

There are two types of NPS accounts subscribers can pick. These are:

Tier 1 NPS account: It is the account mandatory to open for all the subscribers to the scheme. Withdrawals from the account can only be made per the scheme's rules. A minimum payment of ₹500 has to be made while opening the account, and ₹1000 must be contributed per annum. The lock-in period of this account is 60 years. The total tax exemption subscribers can get by subscribing to the scheme is ₹2,00,000 p.a. under sections 80C and 80CCD.
Tier 2 NPS account: This account is voluntary for subscribers to open. The government permits withdrawals from tier 2 accounts. A minimum payment of ₹1,000 is required to open the account. No tax benefits are available to NPS investors in this account. There is no lock-in period in the account. A subscriber can only open a tier 2 account once they have activated their tier 1 account.