Formula & Calculation Methodology
60% Tax-Free Lump Sum at Age 60 + 40% Mandatory Annuity for Monthly Pension.
Step-by-Step Worked Example
₹5,000/month for 25 Years @ 10% expected return
- Total Accumulated Corpus: ~₹66.94 Lakhs
- 60% Tax-Free Cash Withdrawal: ~₹40.16 Lakhs
- 40% Annuity Pension Fund (6.5%): ~₹14,500 / month lifetime pension
Result: Lump Sum: ₹40.16 Lakhs Tax-Free + Monthly Pension: ₹14,500 for life
Frequently Asked Questions
Is NPS Tier-1 withdrawal completely tax-free at age 60?
Yes, 60% lump-sum withdrawal is 100% tax-free, and the remaining 40% is utilized to purchase regular pension annuity.
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