Want ₹1 Lakh Monthly Pension After Retirement? Invest in This Government-Backed NPS Scheme

With rising inflation and the growing cost of living, managing household expenses after retirement has become one of the biggest financial concerns. Experts believe that by the time many working professionals retire, monthly expenses could easily cross ₹1 lakh. To ensure a comfortable lifestyle in old age, it is crucial to plan for a steady retirement income today.

One of the most reliable options for building a pension fund in India is the National Pension System (NPS). This government-backed scheme not only helps you create a large retirement corpus but also ensures a regular pension after retirement. The best part is that NPS offers attractive tax benefits, making it a smart choice for long-term financial planning.

Why Choose NPS for Retirement?

The National Pension System (NPS) is a voluntary, long-term retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It is designed to provide financial security post-retirement by offering a mix of equity, corporate bonds, and government securities.

Key highlights of NPS include:

• Government-backed safety and regulation.

• Flexibility to choose your investment mix (equity, debt, or hybrid).

• Regular pension after retirement through annuity.

• Attractive tax benefits under the Income Tax Act.

Tax Benefits of NPS

Investors in NPS enjoy significant tax advantages:

• Under Section 80CCD(1), you can claim a deduction of up to ₹1.5 lakh, which is included within the ₹1.5 lakh limit of Section 80C.

• An additional deduction of ₹50,000 is available under Section 80CCD(1B).

• This means investors can claim a total tax benefit of up to ₹2 lakh annually by contributing to NPS.

These benefits not only reduce your tax liability but also encourage disciplined retirement savings.

How to Build a ₹1 Lakh Monthly Pension with NPS

The big question most investors ask is: How much should I invest in NPS to receive a pension of ₹1 lakh per month after retirement?

Let’s assume the following:

• Current age: 40 years

• Retirement age: 60 years

• Investment tenure: 20 years

• Expected annual return: 10%

• Annuity rate at retirement: 6%

To achieve a monthly pension of ₹1 lakh:

• You will need a retirement corpus of about ₹4.97 crore.

• To build this corpus, you must invest around ₹65,000 per month in NPS for 20 years.

• At an average return of 10%, your maturity amount will be approximately ₹4.97 crore.

Upon retirement, 40% of the corpus (₹1.98 crore) must be used to purchase an annuity, which will generate a monthly pension of ₹1 lakh. The remaining 60% (₹2.99 crore) can be withdrawn tax-free as a lump sum.

Withdrawal Rules in NPS

The withdrawal rules under NPS are designed to provide both flexibility and long-term income security:

• If the total NPS corpus is less than ₹5 lakh, you can withdraw the entire amount tax-free.

• If the corpus is more than ₹5 lakh, then:

  • 60% can be withdrawn as a lump sum, tax-free.

  • The remaining 40% must be invested in an annuity, which will provide regular pension income.

• The pension received from the annuity is taxable as per the investor’s income tax slab.

Why You Should Start Early

Starting early in NPS allows you to invest smaller amounts while still building a large retirement fund due to the power of compounding. For example, a 30-year-old investor would require a much smaller monthly contribution compared to someone starting at 40.

Early investments not only reduce financial stress but also ensure higher returns with a longer investment horizon.

Final Thoughts

If your goal is to receive a monthly pension of ₹1 lakh after retirement, the National Pension System offers a practical and disciplined path. By investing around ₹65,000 monthly from age 40, you can accumulate a fund of nearly ₹5 crore by retirement, ensuring both lump sum wealth and a steady pension.

With its tax-saving benefits, government backing, and inflation-beating potential, NPS stands out as one of the best retirement planning tools available today.

📌 Disclaimer: Returns and annuity rates mentioned are based on current estimates and may vary in the future. Please consult a certified financial planner before making investment decisions.