Corporate NPS: All You Need to Know About

What is Corporate NPS?

The Corporate NPS model aims to enable companies (private sector, public sector, PSUs, etc) to incorporate NPS into their organisation and extend NPS benefits to their employees. It also allows the entities to offer NPS to both current and potential employees.  Companies can join NPS through Point of Presence (POP). The employee contribution is deducted from the salary an employer contribution is deducted and remitted by the Corporate Head Office to the  POP  with which it has a Memorandum of Understanding. 

Features and Benefits of Corporate NPS

• The employer deducts the amount from the employee’s salary and deposits the same to the employee’s corporate NPS account.
• It also offers 3 fund options, and employees can choose whatever is suitable for them.
• Corporate NPS has a portability option where employees can carry forward their accumulated corpus to their new employer.
• It also provides tax benefits under section 80CCD(1) of the Income-tax Act, 1961.
• Early and partial withdrawal facilities are available.
• The employee has the option to get a lump sum or monthly pension system at the time of maturity.
• It also gives investment flexibility where the investor can switch between equity, corporate debt, government bonds, and alternate funds twice a year, and there is no maximum limit.
  

Eligibility Criteria for Corporate NPS

The following are accessible for the Corporate NPS model:

• The person must be an Indian Citizen
• They should be between the ages of 18 years to 60 years.
• If you are an employee, then the entity must be registered under the NPS Corporate Model.

• Central Government and State Government enterprises.
• Registered Partnership Corporation and Limited Liability Partnership (LLP)
• Entities incorporated under the Companies Act and a variety of Co-operative Acts.
•  Entities incorporated under Parliament Legislature or State Legislature. 
• Societies
• Trusts

Types of Accounts Under Corporate NPS

There are two types of Corporate NPS accounts:

1. Tier I: Under Tier I, the employee can either invest individually or through an employer. It is non-withdrawable until retirement and a great option for retirement savings.
2. Tier II: Under this account, the employee can withdraw voluntarily. This is more like a savings account. However, the withdrawal is subject to minimum contribution and the amount in the account balance. 

Tax Benefits Under Corporate NPS

With Provident Fund, Gratuity, and Superannuation, Corporate NPS is a new investment avenue available for both public and private sector employees. With various other advantages, it also provides tax benefits to its subscribers. 

• Now, the corporate subscriber can claim up to ₹ 7,50,000/- on employer contribution* under section 80CCD (2), over and above the limit of 80C in both regimes. 

*Employer contribution is 10% of Salary (Basic + Dearness Allowance) annually, up to ₹ 7,50,000/- which is deductible from taxable income under section 80CCD(2) over and above ₹ 1,50,000/- limit under section 80CCE.

• Corporates can leverage tax benefits under section 36 (i) (IV) of the Income-tax Act, 1961, on their contributions towards NPS. Up to 10% of salary (Basic + DA) can be claimed as a deductible ‘Business Expense’ from their Profit & Loss Account.

Benefits to the Employer in this Model

• There are no fees for joining Corporate NPS and no set-up or maintenance costs.
• It is a simple process where you can add or remove employees from the model at any time.
• There is no account-related obligation. The corporation is just a facilitator. 
• All account-related maintenance and obligations remain with the employee only. 
• There is no need to form a trust in NPS. 

Investment Options Under Corporate NPS

Corporate NPS give two choices of investment options:

1. Active Choice: It empowers the investor to distribute their funds across four investment streams. Corporate bonds, equity, alternate assets and government securities. You can invest up to 75% in equities and 5% in alternate assets. 
2. Auto Choice: It offers predefined asset allocations to Aggressive, Moderate or Conservative LifeCycle Funds (LC 75, LC 50, LC 25). These funds offer different exposure levels to equities, gradually adjusting based on investors’ age and risk appetite. 

NPS Withdrawal Rules and Regulations

There are certain regulations regarding  corporate NPS withdrawal:

• Only 60% are allowed to withdraw till the age of 60 years. 
• The remaining 40% is converted into annuities.
• After the completion of 3 years, an employee is allowed to with 25% under certain circumstances such as medical emergencies, marriage expenses, construction of the house, or education expenses of children. 

Contributions to Tier I and Tier II Accounts

• Tier I: Minimum contribution of Tier I is per deposit ₹500/-. The minimum annual contribution is ₹ 1000/-. At Least there should be one minimum contribution to Tier I; later on person can decide the frequency of contribution. 
• Tier II: Minimum contribution to Tier II is ₹ 250/- and there is no requirement to maintain a minimum balance to Tier II.

How to Register for Corporate NPS

The following are the steps for Corporate NPS registration:

• First of all, the company has to fill out the corporate registration form.
• After submission of the form to POP, a registration number is issued to the company by POP.
• Once the registration number is issued the scheme is now available to the employee. 

Frequently Asked Questions (FAQ’s)