The National Pension System (NPS) rate of returns has been between 9-12% p.a. in the recent past. As the scheme is linked to the market, the returns vary depending on the performance of equity and debt funds. The scheme is backed by the Central Government and regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
NPS invests in equity, corporate debt, government debt, and alternative assets. After selecting your preferred mix and fund manager, your money is invested in specific schemes across these asset classes, reflecting returns accordingly. NPS offers flexibility with two accounts – Tier I and Tier II.
The NPS rate of return depends on the performance of the underlying equity and debt funds. Here is an overview of the prevailing rate of return for NPS Tier I accounts:
Asset Type |
1-year Returns |
5-year Returns |
10-year Returns |
Alternative assets |
3.98-16.73% |
NIL |
NIL |
Government bonds |
12.95-14.26% |
10.29-10.88% |
9.57-10.05% |
Corporate bonds |
12.46-14.47% |
9.27-10.15% |
10.05-10.64% |
Equity funds |
15.33-18.81% |
13.11-15.72% |
10.45-10.86% |
Disclaimer: These figures are as of January 2021, and are indicative only.
Note that the above rates have been calculated based on the performance of these asset types in the market. They are meant to be used only as a guide.
While you have a fair idea of the approximate rate of return in an NPS Tier I account, take a look at the table below to understand the NPS Tier II returns.
Asset Type |
Returns Expected after 1 Year |
Returns Expected after 5 Years |
Returns Expected after 10 Years |
Government bonds |
12.61-13.42% |
10.40-12.00% |
9.59-10.07% |
Corporate bonds |
12.71-16.36% |
9.55-10.17% |
9.86-10.60% |
Equity funds |
15.19-17.92% |
13.05-15.83% |
10.35-10.58% |
Disclaimer: These figures are as of January 2021, and are indicative only
Before calculating your potential NPS returns, it’s important to understand that this retirement savings scheme does not provide guaranteed returns. Therefore, based on prevailing rates, you can get a rough estimate of how much money you will receive at maturity.
If you prefer manual calculations, here’s an illustration to show how NPS returns are estimated.
Suppose you are contributing to your NPS Tier I account, and your total accumulated corpus at the beginning of the financial year is ₹1 Lakh. Throughout the year, you make contributions, and your NPS fund earns an annual return of 10%.
Initial Corpus |
₹1 Lakh |
Total Contribution (one fiscal) |
₹50,000 |
Total NPS Balance |
₹1.50 Lakhs |
Now, the return is calculated on the total corpus at the end of the year. The formula for calculation: Returns = (Total Corpus at the end − Total Corpus at the beginning) × Rate of Return
i.e. Returns = (₹1,50,000−₹1,00,000)×0.10 = ₹50,000×0.10 = ₹5,000
In case you find manual calculations too complicated, you can easily find NPS calculators online. The estimates provided by these tools are error-free. However, bear in mind that the result depends on the details you have entered.
Public Provident Fund (PPF) and NPS are distinct savings avenues with varying features. While NPS emphasises retirement planning with market exposure, PPF serves as a tax-efficient, fixed-return savings tool with broader usage flexibility.
However, if you’re contemplating choosing between the two, here’s a look at the rate of return and interest rate provided by both:
PPF |
7.1% |
NPS |
9% to 12% |
Disclaimer: These rates are subject to change at the governing authority’s discretion.
FAQs on NPS Returns
How to calculate the NPS returns?
Since NPS returns are linked to the market performance of various assets, calculating it may be challenging. You can use an online NPS calculator to assess the expected maturity value and returns. Simply enter your monthly contribution, age, and select a suitable scheme you want to invest in.
Is NPS tax-free on maturity?
Upon reaching 60, investors can withdraw 60% of the corpus as a tax-free lump sum, with the remaining 40% mandated for annuity purchase, also enjoying tax exemption.
How many times in a year can I invest in the scheme?
You can invest as many times as you want in a year in NPS. The contribution amount and frequency of your contribution entirely depend on you.
How to start an NPS investment?
You can download the NPS mobile app launched by the government to initiate your investment. Additionally, you may visit the eNPS website to book your NPS plan.
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