Shape your golden years with NPS. Start investing now to ensure a financially independent and fulfilling retirement ahead.
Corporate NPS is an extension of the National Pension Scheme. As an initiative undertaken by the government, Corporate NPS aligns with wealth creation goals while offering tax-efficient retirement planning.
In this scheme, both employers and employees contribute to the latter’s NPS account, fostering disciplined savings for retirement. Employees enjoy tax benefits under Section 80CCD (2) of the Income Tax Act, 1961, for employer contributions.
This portable pension system offers a range of investment options, empowering employees to tailor their portfolio. At retirement, a part of the corpus can be withdrawn as a lump sum, providing financial flexibility.
Features and Benefits of Corporate NPS
Tax-saving Investment
Under Section 80CCD (1), employer’s contribution towards NPS, up to 10% of salary (Basic salary + Dearness Allowance) is eligible for tax deduction.
Market-linked Returns
Allocate the corpus across equity, corporate debt, government securities, and alternative assets based on your preferred asset allocation percentages.
Portability
It is fully portable, ensuring continuity across job changes or relocations within India.
Low-cost Scheme
It has one of the lowest expense ratios, i.e. fund management fees, for a managed fund.
Employee Benefits
As an employee, you can maintain the same Corporate NPS account until you attain 60 years of age.
Active and Auto Investment Facility
The active option allows personal management, while the auto option follows a predefined allocation by NPS.Under sections 80C and 80CCD, you are entitled to tax benefits and exemptions should you invest in corporate NPS. Below is a breakdown of the tax benefits employees are eligible for.
1. Tax Benefits for Employees
Contributions made by the employer on behalf of the NPS subscriber is tax deductible subject to the following:
Up to 10% of the salary (Basic Salary + Dearness Allowance)
Total deductions for retiral contributions is limited to ₹7.50 Lakhs p.a.
The employee can also claim a tax deduction on an additional self-contribution of up to ₹50,000 under Section 80CCD (1B).
2. Taxability on returns from NPS
The returns earned on NPS and the lump sum withdrawal at the age of 60 years are tax-free. On withdrawing 60% of the corpus at 60 years, you must utilise the remaining 40% to purchase annuity plans.
However, the monthly payout that is received in the form of an annuity is taxable since this is treated as income in the year of receipt.
The investment options under Corporate NPS are essentially the fund allocation patterns of this investment scheme, as explained below:
1. Active Choice
Active choice allows you to distribute your funds into the four investment streams of Corporate NPS. Here, you can choose the percentage of your total funds that will be invested across the four types of investment options:
Asset Class |
Allocation Limit |
Description |
Corporate Bonds |
100% |
Invested in fixed-income debt securities |
Equity |
75% |
Invested in equities since they’re high-risk investments |
Alternate Assets |
5% |
Allocated to infrastructure or real estate funds |
Government Securities |
100% |
Invested in debt instruments of the government |
2. Auto Choice
Those who don’t hold much experience in investing can opt for the auto choice. Here, your funds will be invested in a predetermined asset class allocation pattern depending on your age.
The following risk-appetite parameters determine the allocation patterns:
Life Cycle Fund |
Equity Exposure |
Reduction Age |
Aggressive Life Cycle Fund (LC 75) |
75% |
Until 35 years, then gradually decreases |
Moderate Life Cycle Fund (LC 50) |
50% |
Until 35 years, then gradually decreases |
Conservative Life Cycle Fund (LC 25) |
25% |
Until 35 years, then gradually decreases |
Understanding the difference between NPS and Corporate NPS ensures clarity when considering pension schemes based on individual or corporate preferences. Here’s a table outlining the distinctions between the two:
Basis of Comparison |
NPS |
Corporate NPS |
Applicability |
Indian citizens, including employees from public, private, and unorganised sectors |
Employees of corporations that have opted for Corporate NPS |
Sponsorship |
Government of India |
Organisation offering Corporate NPS |
Regulator |
Pension Fund Regulatory and Development Authority (PFRDA) |
Trustee appointed by the sponsoring organisation |
Contribution |
Employee and employer contributions are mandatory and set by subscriber |
Sponsoring corporations determine and make contributions |
Investment Choice |
Choose the preferred fund managers and different asset classes |
Sponsoring organisations predetermine the investment options |
Tax Benefits |
Deductions available under Section 80C |
Deductions available under Section 80CCD(2) |
Withdrawals |
Partial withdrawals allowed after 3 years |
Withdrawals depend on the terms and conditions set by the Corporate NPS trust deed |
Annuity |
Invest a minimum of 40% of the corpus in an annuity from a PFRDA-approved insurer |
Annuity plan purchases are subject to any terms and conditions set by the Corporate NPS trust deed |
FAQs on Corporate NPS
Can Corporate NPS be withdrawn anytime?
Partial withdrawal is allowed after 3 years, permitting subscribers to withdraw 25% for reasons like illness, disability, education, marriage, property purchase, or starting a new venture.
What is the minimum investment in corporate NPS?
The minimum initial contribution at the time of registration for NPS Tier I accounts is ₹500 and ₹1,000 for Tier II accounts. After that, the annual minimum contribution is ₹1,000 for Tier I accounts and zero for Tier II accounts.
What happens to Corporate NPS if I resign?
If the corpus when initiating a premature exit request is ₹2.50 Lakhs or less, the entire amount can be withdrawn as a lump sum.
How much Corporate NPS is tax free?
At retirement, tax exemption applies to 60% of the withdrawn corpus as a lump sum. The remaining amount, when invested in an annuity, is also tax exempt.
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