Tax on nps corpus

60% of your Tier 1 lump sum is exempt; ~40% is taxable but likely absorbed by your basic exemption limit. Recommend computing exact figures with your CA at return-filing time factoring in your other FY 2026-27 income.

Post exact figures and other details. 

Post exact figures and other details. 

Post exact figures and other details. 

NPS taxation at maturity follows the 60:40 RULE under the current regime.

At the time of normal maturity (age 60 or retirement):

60% of the corpus can be withdrawn as a LUMP SUM. This is entirely exempt from tax under Section 10(12A) of the Income Tax Act. No TDS, no reporting as income.

40% of the corpus MUST be used to purchase an annuity from a PFRDA-approved life insurer. The annuity purchase amount itself is not taxed at the time of purchase. However, the MONTHLY ANNUITY INCOME you receive from the annuity is taxed as income from other sources (under the applicable slab rate) in each year it is received.

Early withdrawal (partial or before age 60): partial withdrawals for specific purposes (housing, education, illness) up to 25% of your own contributions are exempt under Section 10(12B). If you withdraw the entire corpus before age 60, only 40% can be taken as lump sum (also exempt), and 80% must go to annuity.

For government employees (CG/SG): the rules are broadly similar since the Income Tax Act 2025 aligned treatment.

Key point: the CORPUS GROWTH inside NPS (employer contributions, government contributions, investment returns) is all tax-deferred until withdrawal. Only the annuity income (post-purchase) is taxable.

For the full NPS withdrawal tax treatment and how to report it in ITR-2, this [income tax filing guide for AY 2026-27](https://taxgarden.in/blog/itr-filing-guide-ay-2026-27-new-forms-deadlines) covers the Schedule S and other source income sections.