Pension Rules Complete Guide

Everything about NPS, EPS-95, OPS, UPS, and Gratuity for government and private sector employees in India. Calculate your retirement corpus instantly.

10%Employee NPS
14%Govt Employer NPS
₹25 LakhGratuity Limit
60%NPS Tax-Free Lump Sum

NPS Retirement Corpus Calculator

Estimate your retirement corpus and monthly pension under the National Pension System

Current Age (Years)

Retirement Age
58 Years (PSU / Bank)60 Years (Central Govt)62 Years (Extended)
Monthly Basic + DA (₹)

Sector / Employer Type
Central Government (14% employer)State Government (14% planning input — verify current rate)Private Sector (10% planning input — verify employer rate)
Expected Annual Return (%)

Illustrative return assumption — use a range, not a guaranteed return
Annuity Rate (% p.a.)

Illustrative annuity-rate input — verify live quote at exit
Additional Voluntary Contribution (₹/month) – optional

Extra contributions to Tier-I qualify for ₹50,000 additional deduction u/s 80CCD(1B)

⚡ Calculate My Pension Corpus

📊 NPS Retirement Projection
Years to Retirement—
Monthly Employee Contribution (10%)—
Monthly Employer Contribution—
Total Monthly NPS Contribution—
Total Amount Invested (Career)—
💰 Estimated NPS Corpus at Retirement—
Tax-Free Lump Sum (60% of Corpus)—
Annuity Purchase Amount (40% of Corpus)—
🏠 Estimated Monthly Pension—

Pension Schemes in India 2026

Complete overview of all retirement and pension schemes for Indian employees

🏛️Types of Pension Schemes in India

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NPS

National Pension System – mandatory for govt employees joining after Jan 2004

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OPS

Old Pension Scheme – 50% of last basic, only for those joining before Jan 2004

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UPS

Unified Pension Scheme – assured 50% pension for central govt, from April 2025

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EPS-95

Employee Pension Scheme – for EPFO members in private/organised sector

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Gratuity

Lump sum on retirement after 5+ years; up to ₹25 lakh tax-free

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PPF / SCSS

PPF: 7.1% tax-free | SCSS: 8.2% p.a. for senior citizens (60+)

📋NPS – Key Rules & Contribution Structure 2026

UPS Update (April 2025): Central government employees under NPS can now opt for the Unified Pension Scheme (UPS), which guarantees 50% of average basic pay of last 12 months as pension, provided 25+ years of service. For 10–25 years of service, proportionate pension applies. Minimum assured pension: ₹10,000/month.

⚖️OPS vs NPS vs UPS – Side-by-Side Comparison

🏭EPS-95 – Employee Pension Scheme Rules 2026

Eligibility

Who is Covered?

All EPFO members earning up to ₹15,000/month basic wage. Employees above ₹15,000 can opt in voluntarily. Minimum 10 years of service required for pension eligibility.

Contribution

EPS Contribution

Employee contributes 0% directly. Employer’s 12% EPF contribution is split: 8.33% goes to EPS (capped at ₹1,250/month on ₹15,000 wage ceiling) and 3.67% to EPF.

Pension Formula

Monthly Pension Calculation

Monthly Pension = (Pensionable Salary × Pensionable Service) ÷ 70. Pensionable salary = avg of last 60 months. Max pensionable salary: ₹15,000/month.

Withdrawal

Early Withdrawal Rules

If service < 10 years, scheme certificate or withdrawal is allowed. Pension starts at age 58 (full) or age 50 (reduced by 4% per year early). Deferred pension possible up to age 60 with 4% p.a. increase.

Higher Pension

Higher Pension Option (SC Order)

Following Supreme Court order, eligible employees can contribute 8.33% on actual salary (not capped at ₹15,000) for higher EPS pension. Deadline for application: check EPFO portal for latest updates.

Family Pension

Widow / Family Pension

Widow pension: 50% of member pension (minimum ₹1,000/month). Children pension: 25% per child (max 2 children). Orphan pension: 75% of member pension. Payable till remarriage or child turns 25.

Minimum EPS Pension: The Government of India provides a minimum pension of ₹1,000/month under EPS-95. AICCCTU and unions have been demanding increase to ₹7,500/month — this remains pending as of 2026. Check EPFO official portal for latest notifications.

🎁Gratuity Rules 2026 – Payment of Gratuity Act

Example: An employee with Basic+DA of ₹50,000/month retiring after 30 years of service would receive: (50,000 × 15 × 30) ÷ 26 = ₹8,65,385. This is below ₹25 lakh, so fully tax-free.

💰NPS Tax Benefits 2026

80CCD(1)

Employee Contribution

Deduction up to 10% of salary (Basic+DA) or ₹1.5 lakh (within overall 80C limit). Applicable under old tax regime only.

80CCD(1B)

Additional Contribution

Extra deduction of ₹50,000 over and above 80C limit (₹1.5 lakh). Total possible tax saving under NPS: up to ₹2 lakh/year under old regime.

80CCD(2)

Employer Contribution

Employer’s NPS contribution (up to 14% for govt, 10% for private) is deductible. This benefit is available under both old and new tax regimes.

Lump Sum

Tax-Free at Maturity

60% lump sum withdrawal at age 60 is completely tax-free. 40% used for annuity purchase is tax-free at investment stage but annuity income is taxable as per your slab.

New Tax Regime (2026): Under the new default tax regime, 80CCD(1) and 80CCD(1B) deductions are NOT available. However, employer’s NPS contribution u/s 80CCD(2) remains deductible even under the new regime — making NPS still valuable for salaried employees.

🏧NPS Partial Withdrawal Rules

1

Minimum Lock-in: At least 3 years of NPS Tier-I account required before any partial withdrawal is permitted.

2

Maximum Amount: Up to 25% of employee’s own contributions (excluding employer contribution and returns) can be withdrawn.

3

Allowed Purposes: Higher education of children, marriage of children, purchase or construction of residential house, treatment of specified critical illness (self/spouse/children/parents).

4

Frequency Limit: Maximum 3 partial withdrawals allowed during the entire NPS tenure before retirement.

5

Tax Treatment: Partial withdrawals from NPS Tier-I are fully exempt from income tax as per PFRDA circular and Section 10(12B).

6

How to Apply: Submit withdrawal request through your nodal office (for govt employees) or directly via NPS CRA portal (for private sector).

🏛️Central Government Pension Rules (CCS Pension Rules 2021)

Dearness Relief (DR) 2026: Central government pensioners under OPS receive DR at 53% of basic pension effective January 2026 (same rate as DA for serving employees). DR is revised every 6 months in January and July.

📊Retirement Savings Schemes – SCSS & PPF Rates 2026

SCSS

Senior Citizens Savings Scheme

Interest rate: 8.2% p.a. (Q1 FY2026-27). Max deposit: ₹30 lakh. Tenure: 5 years (extendable by 3 years). Eligible: Age 60+ (or 55+ for VRS). Quarterly interest payout. 80C deduction available (old regime).

PPF

Public Provident Fund

Interest rate: 7.1% p.a. (compounded annually). Lock-in: 15 years (extendable in 5-year blocks). Max: ₹1.5 lakh/year. Entire corpus (principal + interest) is completely tax-free on maturity.

PM-SYM

PM Shram Yogi Maan-dhan

For unorganised sector workers with income up to ₹15,000/month. Age: 18–40 years. Monthly contribution: ₹55–₹200. Guaranteed pension: ₹3,000/month from age 60. Equal govt co-contribution.

APY

Atal Pension Yojana

For unorganised workers below 40 years. Pension options: ₹1,000 to ₹5,000/month at age 60. Contribution depends on entry age. Govt co-contribution ended but scheme continues. Not for income taxpayers.

🧮How to Calculate Your Pension – Step by Step

1

Identify Your Scheme: Check if you are under OPS (joined before Jan 2004), NPS (joined after Jan 2004), UPS (opted in from April 2025), or EPS-95 (private/organised sector).

2

For NPS Corpus: Total Monthly Contribution × [((1 + r)ⁿ – 1) ÷ r] where r = monthly return rate, n = months to retirement. Use our calculator above.

3

For OPS/UPS Pension: Pension = 50% of last basic pay. Add Dearness Relief (DR) on top. For UPS: average of last 12 months’ basic pay × 50%.

4

For EPS-95 Pension: Monthly Pension = (Pensionable Salary × Service Years) ÷ 70. Pensionable salary = avg of last 60 months basic (capped at ₹15,000).

5

Add Gratuity: Calculate separately using (Last Basic+DA × 15 × Years) ÷ 26. Check if total stays within ₹25 lakh tax-free limit.

6

Plan Post-Retirement Income: Combine pension + annuity income + SCSS/PPF interest + any rental income. Ensure your monthly post-retirement income covers at least 70–80% of pre-retirement expenses.

How to Use Pension Rules Without Mixing Different Schemes

A pension decision starts with one question: which retirement framework actually covers the employee? OPS-style pension rules, NPS, UPS, EPS-95 and employer-specific superannuation arrangements do not use the same contribution formula, exit rule, tax treatment or family-benefit structure. A useful first step is to identify the appointment date, employer, service category and the pension scheme shown in the service record. Then compare the result with the dedicated Pension Rules Guide, NPS Calculator or NPS vs OPS Comparison rather than applying one formula to every employee.

For Central Government employees, the pay record matters because many retirement calculations use Basic Pay, Dearness Allowance or both. Before estimating retirement benefits, reconcile the last pay with the Pay Matrix Calculator, check allowance history through the DA Rate History Calculator, and confirm the retirement date with the Retirement Age Calculator. This avoids a common error: using a current gross-salary figure where a rule actually calls for basic pay, emoluments, average emoluments or a pensionable salary concept.

Keep NPS projections as scenarios, not guarantees

The corpus calculator on this page is a planning model. It assumes a constant return, a constant annuity rate and contribution rates selected in the form. Real NPS outcomes depend on market performance, contribution history, salary growth, asset allocation, charges, applicable exit rules and the annuity option chosen at exit. The projected corpus should therefore be read beside the NPS Tier 1 Calculator, NPS Withdrawal Calculator and Retirement Corpus Calculator.

Practical rule: treat every percentage shown in a calculator as an input or planning assumption unless the employee’s current rule, scheme and service record confirm that the percentage applies to that employee.

Retirement Benefit Audit: A Practical Checklist

A complete retirement review is broader than monthly pension. Build a one-page checklist covering pension or NPS, gratuity, leave encashment, commutation where applicable, family benefits, insurance or group-scheme balances, pending arrears and tax documentation. The Retirement Benefits Calculator can be used as the central worksheet, while the Gratuity Calculator, Leave Encashment Calculator and Pension Commutation Estimator handle individual components.

Start with the service book or digital service record. Check date of birth, date of appointment, qualifying service, periods of non-qualifying service if relevant, last pay, pay level, increment date, promotion or MACP history, leave balance, nomination details and the pension scheme recorded by the employer. A mismatch in any one of these fields can affect more than one retirement benefit.

Do not combine pension and NPS language

Traditional pension calculations and NPS projections answer different questions. A defined pension formula estimates a sanctioned monthly benefit under the applicable pension rules. NPS estimates a market-linked corpus and the income that may be generated from the exit structure selected at that time. For side-by-side planning, use the NPS vs Old Pension Comparison; for a pension amount after a pay revision, use the Revised Pension Calculator.

Family benefits need a separate check

Do not assume that a spouse or dependent simply receives the same amount as the retiree. Family-pension eligibility, rate, enhanced period, dependency conditions and documentation can differ from the retiree’s own pension. Use the Family Pension Calculator only after identifying the governing rule and sanctioned basic pension.

Tax needs its own worksheet

Pension, annuity income, gratuity, commuted pension, leave encashment and NPS withdrawals can receive different tax treatment depending on employee category and the law in force for the relevant year. Avoid labelling the entire retirement package “tax free.” For planning, cross-check the Income Tax Calculator and Tax Exemption Calculator, then compare the result with the actual tax documents and current rules.

Worked Retirement Planning Workflow

Suppose an employee is five years from retirement. First, confirm the likely final pay path instead of assuming the present basic pay will remain unchanged. Review the next increment date, likely promotion or MACP events and the current pay level. Second, model the retirement date and estimate gratuity and leave encashment separately. Third, if the employee is under NPS, run low, middle and high return scenarios rather than relying on a single return rate. Fourth, if the employee is under a pension framework that permits commutation, test 0%, 20% and the applicable maximum commutation percentage using the Pension Commutation Table.

Finally, create a reconciliation sheet showing each source figure, the rule or order it came from, the calculator result and the amount finally sanctioned. This is especially useful when a DA revision, pay fixation order or arrear payment arrives close to retirement. The same record can be used later to verify revised pension, gratuity differences or family pension.

• Confirm scheme and service category before applying a formula.
• Use Basic Pay, Basic+DA or pensionable salary only where the relevant rule requires it.
• Keep market-return and annuity-rate assumptions clearly labelled as scenarios.
• Check nominations, bank details and family records before retirement paperwork is submitted.
• Retain pension payment order, gratuity sanction, leave encashment calculation and NPS exit statements together.

This approach makes the calculator a planning aid rather than a substitute for the employer’s sanction order. It also makes future revisions easier to audit.

Frequently Asked Questions

Common queries about pension rules and retirement planning in India

What is the difference between NPS and OPS?
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The Old Pension Scheme (OPS) guarantees 50% of the last drawn basic pay as monthly pension — funded entirely by the government with zero employee contribution. The National Pension System (NPS) is a market-linked defined contribution scheme where both employee (10%) and employer (14% for govt) contribute. NPS pension depends on corpus accumulated, while OPS pension is fixed and assured. OPS also includes Dearness Relief (DR) revisions, which NPS does not.
What is the Unified Pension Scheme (UPS) launched in 2025?
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The Unified Pension Scheme (UPS) was introduced by the Central Government effective April 1, 2025, as an option for central govt employees under NPS. It provides an assured pension of 50% of the average basic pay of the last 12 months for employees with 25+ years of service. For 10–25 years, proportionate pension applies. Minimum guaranteed pension is ₹10,000/month. A lump sum equal to 1/10th of monthly emoluments for every 6 months of service is also paid. Dearness Relief (DR) applies on UPS pension just like OPS.
Can I withdraw my full NPS corpus before retirement?
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No. NPS does not allow full premature withdrawal before age 60. If you exit before 60 (after 5 years of subscription), only 20% can be taken as lump sum and the remaining 80% must be used to purchase an annuity. However, partial withdrawals (up to 25% of own contributions) are allowed after 3 years for specific purposes like education, marriage, medical treatment, or home purchase — with a limit of 3 times during the entire tenure. The full 60% lump sum + 40% annuity split applies only on exit at age 60.
Is pension income taxable in India?
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Yes, pension income is taxable under the head “Salaries” in India. This includes monthly pension from OPS, UPS, and annuity income from NPS. However, commuted pension (lump sum) is fully exempt for government employees and partially exempt for non-government employees (1/3rd exempt if gratuity received; 1/2 if not). The 60% NPS lump sum at retirement is completely tax-free. EPS-95 pension is also taxable. A standard deduction of ₹75,000 (FY2025-26 onwards) is available to pensioners under the new tax regime.
What is the minimum qualifying service for pension in India?
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For Central Government employees (OPS/UPS), the minimum qualifying service for pension is 10 years. For UPS, minimum 10 years service gives proportionate pension; 25 years gives full 50% pension. For EPS-95, minimum 10 years of contribution is required to be eligible for monthly pension at age 58. If service is less than 10 years, you receive a scheme certificate or withdrawal benefit from EPS. For gratuity, the minimum is 5 years of continuous service.
How is family pension calculated after an employee’s death?
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For Central Government (OPS), family pension is 30% of the last basic pay (enhanced to 50% for 7 years from date of death or till the employee would have turned 67, whichever is earlier). For EPS-95, widow pension is 50% of member pension (minimum ₹1,000/month). Children receive 25% each (max 2 children). For NPS, the family can either withdraw the full corpus or the spouse can continue the NPS account. The nominee receives the entire accumulated corpus if the member dies before retirement.
What is the current Dearness Relief (DR) for pensioners in 2026?
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As of January 2026, Dearness Relief (DR) for Central Government pensioners under OPS is 53% of basic pension. DR is revised twice a year — effective January 1 and July 1 — at the same rate as Dearness Allowance (DA) for serving employees. DR is calculated on the original basic pension (not commuted amount). It is payable to all OPS/UPS pensioners and family pensioners. DR is fully taxable as income.
How much NPS tax deduction can I claim in 2026?
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Under the old tax regime, you can claim: (1) Up to 10% of basic+DA u/s 80CCD(1) within the ₹1.5 lakh 80C limit; (2) Additional ₹50,000 u/s 80CCD(1B) over the 80C limit — total NPS tax benefit up to ₹2 lakh. Under the new tax regime (default from FY2024-25), 80CCD(1) and 80CCD(1B) are not available. However, employer’s NPS contribution u/s 80CCD(2) (up to 14% for govt, 10% for private) remains deductible even under the new regime — this is the only NPS tax benefit available under the new regime.
What is the EPS higher pension option after the Supreme Court order?
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The Supreme Court in November 2022 upheld the right of eligible EPFO members to contribute to EPS on their actual salary (not capped at ₹15,000). This allows higher pension payout calculated on full salary. Eligibility: members who were part of EPS before September 1, 2014, and contributed on higher wages. EPFO opened an online window for applications. The higher contribution difference (8.33% on actual salary vs ₹15,000 cap) must be deposited along with interest. Check the EPFO portal for the latest deadline and procedure.
Which pension scheme is best – NPS, OPS, or UPS?
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OPS is considered best for guaranteed, inflation-protected income with zero contribution but is not available for new government employees. UPS combines the security of OPS (50% assured pension + DR) with the contribution model of NPS — best option for central govt employees who want certainty. NPS offers market-linked growth potential; employees who invest wisely in equity-heavy funds may accumulate a larger corpus than OPS/UPS provides — but this carries market risk. For private sector, NPS + EPS-95 + PPF/SCSS combination is recommended for a balanced retirement portfolio.