Corporate National Pension Scheme

What is the Corporate National Pension Scheme?

The Corporate NPS allows employees to contribute a part of their salary towards their retirement plans. Employers can also make a matching contribution to the employee's retirement savings.

Contributions from both the employee and the employer are invested in a portfolio of stocks, bonds, and other securities. The goal of investing in this portfolio is to generate returns that will help the employee build a retirement corpus.

Employees who are self-employed or working in unorganized sectors can also participate in the scheme.

The Pension Fund Regulatory and Development Authority (PFRDA) regulates the CNPS. The scheme was launched in 2011 and is open to all employees in the corporate sector.

Features of Corporate NPS for Employees

Listed below are some key features of the scheme:

• NPS is prudentially regulated by PFRDA with transparent investment norms and regular monitoring of fund managers by NPS Trust.

• NPS accounts are portable across geographies and employment.

• There is flexibility in choosing Point Of Presence, Pension Fund Managers, Investment Options, Annuity Service Provider, and Annuity schemes.

• NPS is a low-cost pension scheme compared to others globally.

• NPS transactions are simple and web-enabled, with all transactions traceable through the CRA system, and fund, NAV, and contribution status can be checked through the CRA website.

Who Can Join Corporate NPS?

An individual is eligible if he/she falls into the following categories:

• All Indian citizens are eligible for NPS under Corporate model

• Age range for NPS is 18 to 65 years

• Open to all employees of registered organizations under corporate model

Types of Accounts under CNPS 

Two types of accounts are available to the employees under this model:

• Tier I account is a retirement savings account where contributions are made by the subscriber, employer, or both. It is non-withdrawable and offers tax benefits for both parties.

• Tier II account is a savings account that is voluntary, and subscribers can withdraw their savings whenever they want, provided they meet the minimum contribution and balance requirements.

Contributions to Tier I and Tier II Accounts

Minimum Contributions (For Tier-I)

• Minimum number of contributions per year = 1

• Minimum amount per contribution = Rs 500

• Minimum contribution per year = Rs 6,000

Minimum Contributions (For Tier-II)

• Minimum amount per contribution = Rs 250

• Minimum balance of Rs. 2000/- at the end of each financial year.

• Minimum number of contributions per year = 1

How to Register for Corporate NPS?

Step 1: To register with the PFRDA, corporations must complete the necessary registration forms and provide the specified corporate KYC documents. Once this is done, a distinct registration number is assigned to each separate legal entity within the corporation.

Step 2: Employees can enroll in NPS, clarify their doubts, and complete the joining process digitally either during or after attending the awareness sessions. Once the employees have registered, the HR department validates their employment information and assists in activating their PRANs.

Step 3: The process of corporate contribution involves obtaining consent from employees and verifying it, after which the corporate deducts the contribution amount from the salary. The corporate may choose to send this amount to respective insurer for further processing.

Benefits to the Employer in this Model

Different benefits offered by the scheme to the employer are:

• Companies registered with NPS can get tax benefits for contributing to their employees' pensions

• Starting from April 1, 2012, up to 10% of the employer's contribution towards the pension can be deducted as a "Business Expense"

• Corporates save on expenses related to trust formation, fund management, and recordkeeping

• Companies can choose to either select PF for their employees or let them choose for themselves

• NPS provides a platform for co-contributing towards employees' pensions

Tax Benefits of Corporate NPS

Tax benefits to employer:

• Contributions made by the employer (up to 10% of Basic + DA) are allowed as a business expense under Section 36 (1) iv (a) of the Income Tax Act 1961

Tax benefit to employees:

•  Employees can invest up to Rs.50,000. This investment is eligible for tax deduction u/s 80CCD (1B) of the Income Tax Act, 1961.

Wrapping It Up! 

Corporate Pension Schemes are an important benefit for an employer to its employees. These schemes provide a sense of financial security and stability for employees during their retirement years, which can ultimately improve their overall well-being.

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