What is an annuity plan?

An annuity plan is a contract with a life insurance provider where you pay a lump sum purchase price in exchange for regular guaranteed income payouts for life or a specified period.

What is the difference between immediate annuity and deferred annuity?

An immediate annuity starts paying monthly or annual pension income immediately after paying the lump sum, whereas a deferred annuity starts paying pension after a deferment period of 1 to 10 years.

How much pension do I get from NPS annuity component at age 60?

PFRDA mandates that at least 40% of your NPS retirement corpus must be converted into an annuity plan. On a Rs 1 crore NPS corpus, Rs 40 lakh invested in annuity at 7% gives roughly Rs 23,333 per month.

What is annuity with return of purchase price (ROPP)?

In an annuity with return of purchase price, you receive guaranteed pension for life, and upon the death of the annuitant, the 100% original lump sum purchase price is refunded to your nominee.

Is annuity income taxable in India?

Yes, annuity income received periodically is fully taxable as income from other sources and added to your total annual income, taxed at your applicable income tax slab rate under both old and new regimes.

What is a joint life annuity policy?

A joint life annuity pays guaranteed pension for as long as either you or your spouse is alive, with 100% or 50% pension continuing to the surviving spouse after the death of the primary annuitant.

Which life insurance company offers the highest annuity rates in India?

Annuity rates vary between 6.5% and 7.8% depending on entry age, annuity option, and provider among LIC of India, HDFC Life, ICICI Prudential Life, SBI Life, and Max Life.

Does annuity rate change over time once locked in?

No, once an immediate annuity plan is purchased, the annuity rate and pension amount are locked guaranteed for life and cannot be reduced by the insurance company.

How does deferment period increase annuity income?

Deferring annuity payouts by 5 to 10 years allows your initial corpus to compound during the deferment phase, yielding significantly higher annuity rates and monthly payouts when payments begin.

Fermor is a financial platform for India. Every calculator is free to use, and a free account is available to save your results and access them later. Fermor is building an automated financial action system using the Account Aggregator framework to connect real accounts and close the gap between knowing what to do with your money and actually doing it.

Annuity Income Calculator: Monthly Pension & Payout

What Is an Annuity Income Calculator?

An annuity income calculator computes the exact monthly or annual pension you receive when investing a lump sum retirement corpus into an annuity policy.

When retiring in India, investors convert accumulated wealth from the National Pension System (NPS), EPF, or mutual funds into guaranteed lifetime income through insurance providers like LIC of India, HDFC Life, ICICI Prudential, and SBI Life.

This calculator factors in annuity option types (Life Annuity vs Return of Purchase Price vs Joint Life), payout frequencies, and deferment periods to project guaranteed regular income.

Annuity Pension Calculation Formula

Annuity payouts are calculated based on the purchase price and the prevailing headline annuity rate offered by the life insurance company at the time of policy purchase.

Annual Pension Formula

Annual Pension = Purchase Price × (Effective Annuity Rate / 100)

Monthly Pension Formula

Monthly Pension = Annual Pension / 12

Worked example: Rs 1 Crore corpus invested at 7.0% annuity rate with Return of Purchase Price (0.95x option adjustment = 6.65% effective):

• Annual Pension = Rs 1,00,000,000 × 6.65% = Rs 6,65,000 per year

• Monthly Pension = Rs 6,65,000 / 12 = Rs 55,417 per month

• 25-Year Lifetime Payout = Rs 6,65,000 × 25 = Rs 1.66 Crore (plus Rs 1 Crore refunded to nominee)

Immediate vs Deferred Annuity Plans

Immediate annuity plans begin paying monthly income immediately upon policy inception. Deferred annuity plans allow your corpus to compound during a 1 to 10 year deferment window before monthly income commences.

Comparison of Immediate and Deferred Annuity Features in India.
Feature	Immediate Annuity	Deferred Annuity
Income Start Date	Next month after payment	After 1 to 10 years deferment
Ideal Target Audience	People retiring today (Age 60)	Early retirement planners (Age 45-55)
Annuity Rate Benefit	Rate locked at purchase	Higher rate due to compounding

Income Tax on Pension Annuities in India

Unlike SWP withdrawals from equity mutual funds which enjoy LTCG tax relief, monthly annuity income received from life insurance companies or NPS is classified as Income from Other Sources under the Income Tax Act.

Annuity payouts are added to your total annual taxable income and taxed at your applicable slab rate under both the Old Tax Regime and New Tax Regime.

How to Use This Annuity Income Calculator

Select Annuity Mode: Choose between Immediate Annuity (for current retirees) and Deferred Annuity (for future retirement).
Enter Purchase Price: Input your retirement lump sum or NPS annuity allotment amount.
Set Annuity Rate & Option: Choose Return of Purchase Price (ROPP), Life Annuity, or Joint Life.
View Pension Breakdown: See your guaranteed monthly pension and total lifetime payout projections.

Are you a CA or financial advisor?

Generate branded retirement planning and Tax Optimization Reports for your clients.

Get started free

Frequently Asked Questions

At a typical current annuity rate of 7.0% per annum with return of purchase price, a Rs 1 crore lump sum purchase price generates approximately Rs 58,333 per month in guaranteed lifelong pension.

Disclaimer: All figures and rates displayed by this calculator are illustrative and based on general insurance parameters in India. Actual annuity rates are determined by individual life insurance companies like LIC, HDFC Life, ICICI Prudential, and SBI Life at the time of policy issuance based on gender, exact age, and medical underwriting. This tool is for educational purposes and does not constitute financial advice.