NPS vs mutual fund calculator: what is spendable at 60

Why compare on spendable money

NPS and an equity mutual fund are the two most common ways to save for retirement through the market. Comparing their final corpus figures is misleading, because an NPS corpus is not all yours to spend at 60. At least 20% of it must buy an annuity, and part of the rest is taxed. The NPS vs mutual fund calculator puts both on the same footing: money you can actually deploy at 60, after tax.

The inputs

The NPS return is set lower by default because its equity allocation is capped. To see what the pension funds have actually earned, the NPS returns page lists them by scheme, and our post on NPS returns by pension fund compares them.

The deduction field's hint reads "old regime only". Under the new regime, which is the default, it is worth nothing, and zero is the realistic entry.

Some assumptions are fixed in the code: the annuity pays 6% a year, the exit is a normal one at 60 by a non-government subscriber, and the annuity takes the 20% minimum.

The outputs

Three boxes: NPS, spendable at 60 ("lump sum plus compounded tax relief"), Fund, after tax, and Fund ahead by or NPS ahead by. Then a box, "What NPS actually gives you at 60", itemises the corpus, and a donut splits it into the lump sum after tax, the tax on it, and the part locked into an annuity.

Worked example: the defaults

NPS. ₹10,000 a month for 25 years at 10% grows to ₹1,33,78,903. The calculator splits it:

The last line is the ₹50,000 deduction at a 30% slab, ₹15,000 a year of tax saved, treated as invested in the same fund at 12% and taxed like it. Spendable at 60: lump sum less its tax, plus the relief, ₹1.20 crore.

Fund. The same ₹10,000 a month at 12% grows to ₹1,89,76,351. After 12.5% tax on gains above the ₹1.25 lakh exemption, ₹1.70 crore.

Fund ahead by ₹49.57 lakh on spendable money.

How to read that result

Two points before drawing a conclusion. First, the comparison leaves the annuity out of the NPS side entirely, because it is not capital you can spend. It is not worthless: here it pays about ₹1.61 lakh a year for life, taxed at your slab. If a guaranteed income is something you want, that is a point for NPS that the headline box does not show.

Second, most of the gap comes from the two return assumptions, not from NPS's rules. Move them and the gap narrows sharply:

At equal returns, NPS trails by a few lakh on spendable money while also paying a pension, ₹1.91 lakh a year in the both-at-11% row. That is the real trade: a fund gives you all of it, whenever you want; NPS gives you a little less as capital, some as income, and nothing before 60.

What the calculator leaves out

• Employer NPS. An employer's contribution, deductible up to 14% of basic under the new regime, is not modelled. For many salaried people it is the strongest reason to hold NPS. The guide to NPS tax benefits covers all three deductions.
• Costs. NPS fund charges are far below an equity fund's expense ratio. The return inputs are where you account for that.
• Liquidity. NPS is locked to 60, with narrow partial withdrawals before then. A fund can be sold any time.
• Government subscribers and early exits. Different annuity floors apply, and the calculator models only the non-government normal exit.

Our post on taking 80% of NPS at 60 works through the lump-sum tax at several slabs, and EPF vs NPS compares NPS with the other main retirement account. The guide NPS or mutual funds for retirement? sets out the wider argument, and the NPS calculator projects the NPS side on its own. Try your own contribution and slab in the NPS vs mutual fund calculator, at two or three return pairs. None of this is investment advice.