Corporate NPS

Corporate NPS Quick Facts

How Corporate NPS Operates

A company first registers as a corporate entity with a Central Recordkeeping Agency, following PFRDA's corporate registration framework, after which HR can onboard employees under that registration.

Each employee gets an individual Tier I account and PRAN, so the NPS account belongs to the individual, not the employer and does not close when the employee leaves the company. On leaving, the employee can either continue contributing to the same account individually or link it to a new employer's Corporate NPS registration, if available. Only the source of future contributions changes; the accumulated corpus remains invested and continues to grow.

Contributions from the employer, employee or both are invested by PFRDA-registered Pension Fund Managers across equity, corporate debt and government securities, based on the investment option selected.

Corporate NPS Tax Benefits for Employers and Employees

Corporate NPS carries distinct tax treatment on each side of the contribution, and the details differ depending on which tax regime the employee has chosen.

For the employer, contributions made to an employee's NPS account can typically be claimed as a business expense under Section 36(1)(iv)(a) reducing the company's taxable profit.

For the employee, the same contribution is deductible from the employee's salary under Section 80CCD(2) of the Income Tax Act 1961, separately from the ₹1.5 lakh limit under Section 80C.

In practice, this means a portion of the employee's compensation can be directed towards retirement savings before income tax is calculated on that amount, subject to the applicable limits. This makes Corporate NPS one of the relatively limited employer-linked retirement-saving avenues that continue to offer a specific deduction under the new tax regime.

Under the Income-tax Act, 2025, effective from 1 April 2026, the employee-side provisions got renumbered. The employer contribution deduction moved to Section 124, and the personal ₹1.5 lakh deduction moved to Section 123. Section 36 itself, covering the employer's business-expense deduction, keeps its existing number under the new Act. The limits themselves are unchanged either way, and returns for income earned up to 31 March 2026 still use the older numbering throughout.

Since FY 2025-26, the new tax regime allows a uniform 14% deduction for every employer type. The benefit is especially relevant for employees opting for the new regime because Section 80CCD(2) remains available even though several deductions available under the old regime are not. Combined employer contributions to EPF, NPS, and superannuation exceeding ₹7.5 lakh in a year become taxable as a perquisite in the employee's hands. Any interest or growth on that excess is taxable too.

The Corporate NPS Tax Benefit With an Example

Most companies implement Corporate NPS without adding to their overall salary cost, by restructuring how an existing CTC is split rather than adding a new line item. A portion of what would otherwise be paid as a taxable allowance is instead routed into the employer's NPS contribution. This results in an NPS deduction from salary with part of the existing CTC redirected towards the employee's NPS account.

Here is what that looks like in practice. Suppose an employee has a Basic Pay plus DA of ₹80,000 a month or ₹9,60,000 a year. If the employer restructures 10% of this into an NPS contribution then that amounts to ₹96,000 a year moved from a taxable allowance into the employee's NPS account. For an employee who is in the 30% tax bracket, this saves roughly ₹29,950 in tax for the year, including cess. The company's total CTC stays exactly the same as before.

Corporate NPS Compared With EPF and Gratuity

Most companies already offer EPF and gratuity, and Corporate NPS is meant to complement these rather than replace them. Unlike EPF, PFRDA does not require an employer to contribute to NPS. A company may offer Corporate NPS without making any employer contribution, and whether it contributes and how much it contributes depends on the company's policy and the employee's compensation structure or offer letter.

This makes employer contribution an important point of difference: EPF carries a statutory employer contribution requirement, whereas Corporate NPS does not. Where the company does contribute, the amount and terms are determined by its compensation policy or the employee's employment terms.

Withdrawal Rules Under Corporate NPS

Corporate NPS follows the same exit framework as individual NPS, since the underlying account is identical.

• Lump-sum withdrawal: Non-government subscribers, which includes Corporate NPS accounts, can currently withdraw up to 80% of the corpus as a lump sum at normal exit after age 60, or the full corpus if it is ₹8 lakh or less.
• Tax-free limit: This is the PFRDA withdrawal limit, not the tax-free limit. Section 10(12A) of the Income Tax Act still exempts only 60% of the corpus. The portion between 60% and 80% may therefore be taxable at slab rate unless the tax law is separately amended to match.
• Tax law change: Under the Income-tax Act, 2025, this exemption moves from Section 10(12A) into Section 11, alongside other exempt-income provisions, effective 1 April 2026.

For a complete breakdown of premature exit, partial withdrawal limits, and the newer Systematic Lumpsum Withdrawal option, the NPS withdrawal rules guide covers this in full.

Who Should Consider Corporate NPS

Corporate NPS fits a range of company sizes rather than one specific type.

• Start-ups building a benefits package from scratch often use it to offer a retirement benefit without a long-term liability, since contributions are defined and periodic rather than open-ended.
• Mid-sized and larger organisations use it to strengthen retention, particularly for senior or high-earning employees whose EPF contributions cap out well below what they could otherwise save.
• For any company already offering EPF and gratuity, adding Corporate NPS is usually a matter of registration and payroll setup rather than a major structural change.

Conclusion

Corporate NPS gives employers a tax-efficient, low-commitment way to strengthen their retirement benefits. It also gives employees a portable account with real investment choice and multiple layers of tax deduction. Section 36(1)(iv)(a) covers the company's side of the deduction while Section 80CCD(2), Section 124 under the Income-tax Act, 2025 covers the employee's. Delivered through a cost neutral salary restructure, this combination makes Corporate NPS an easy addition to most compensation packages.

Companies exploring this can contact PensionBazaar to understand the registration process and implement Corporate NPS for their teams.