Corporate National Pension Scheme (NPS): Why Consider? | UTI PFL

Corporate National Pension Scheme (NPS) is an increasingly popular retirement solution for employees in both the public and private sectors. It provides a unique investment opportunity that offers tax benefits, flexibility, and long-term financial security. If you're wondering why you should consider Corporate NPS for your organisation or as an employee, this article will explain its key advantages.

What is Corporate NPS?

Corporate NPS is a model designed to help companies integrate the National Pension Scheme into their operations. It enables organisations across sectors, including the private sector, public sector, and PSUs, to offer the NPS benefits to their employees. This helps employees secure their post-retirement life while enjoying tax benefits during their working years.

Companies can sign up for NPS through Points of Presence (POPs), and employee contributions are directly deducted from their salaries. Employer contributions are also deducted and remitted by the company’s corporate head office to the POP.

Features and Benefits of Corporate NPS for Employees

Corporate NPS is ideal for employees to build a substantial retirement corpus while enjoying flexibility and tax advantages throughout their careers.

Let’s dive into the core benefits:

1. Portability: Employees can carry their accumulated corpus to their new employer if they switch jobs. This portability makes Corporate NPS a convenient option for employees with dynamic career paths.
2. Fund Flexibility: Corporate NPS offers three fund options – equity, corporate debt, and government bonds. Employees can choose or switch between funds twice a year based on their risk appetite and market performance.
3. Tax Savings: Employees get tax benefits under Section 80CCD(1) of the Income-tax Act, 1961. This means that contributions towards NPS from the employer and the employee are eligible for deductions. Under Section 80CCD(2), employees can claim up to ₹ 7,50,000 on employer contributions annually, in addition to the 80C limit.
4. Withdrawal Flexibility: Corporate NPS allows early and partial withdrawals under certain circumstances, such as medical emergencies, children’s education, or home construction. Upon maturity, employees can choose between a lump sum withdrawal or a regular monthly pension.
5. Investment Choices: With Corporate NPS, employees can invest in various asset classes, including equities, corporate bonds, and government securities. Whether they prefer a high-growth, moderate, or conservative approach, there are options tailored to their risk tolerance and financial goals.

Why Should Companies Adopt NPS for Corporate Employees?

NPS offers several compelling benefits to corporate employees. From a company’s standpoint, it’s a smart tool for enhancing employee satisfaction and retention.

Here’s why you should consider implementing Corporate NPS in your organisation:

1. No Setup Costs: One of the key advantages for employers is that no fees are involved in joining Corporate NPS. There's no need to establish a trust or cover account maintenance costs.
2. Employee Retention: Offering Corporate NPS can boost employee loyalty. It demonstrates the company's commitment to their long-term financial security and well-being, which is an attractive incentive for current and prospective employees.
3. Tax Benefits: Employers can also claim tax deductions under Section 36 (i) (IV) of the Income-tax Act, 1961. Up to 14% of salary (Basic + Dearness Allowance) can be claimed as a deductible business expense, reducing the company’s taxable income.

Who can be eligible for Corporate NPS?

• Entities registered under the Companies Act
• Entities registered under various Co-operative Acts
• Central Public Sector Enterprises (CPSEs)
• State Public Sector Enterprises (SPSEs)
• Registered Partnership Firms
• Registered Limited Liability Partnerships (LLPs)
• Any body incorporated under an Act of Parliament, State Legislature, or by order of the Central/State Government
• Proprietorship Concerns
• Trusts/Societies

Types of Corporate NPS Accounts

There are two types of accounts under Corporate NPS:

Tier I: A mandatory, non-withdrawable account until retirement. It's ideal for long-term savings and offers tax benefits under Section 80CCD(1) and 80CCD(2).

Tier II: This voluntary account allows employees to withdraw funds at any time, similar to a savings account. However, it does not offer the same tax advantages as Tier I.

How to Register Offline for Corporate NPS

Corporate NPS provides employees in the organized sector the opportunity to contribute to their NPS accounts. Enrolling in Corporate NPS is easy and can be done offline. To complete the registration process, subscribers need to submit a few essential documents, including:

• Subscriber Registration Form
• KYC Documents

Ready to get started? Get in touch with us at contact@utipf.co.in for more information on and assistance with your Corporate NPS enrollment!

Conclusion

Corporate NPS is an excellent retirement savings scheme that benefits both employers and employees. For employers, it provides a tax-efficient way to contribute to employee welfare while employees gain access to a flexible, portable, and tax-saving retirement plan. By offering Corporate NPS, companies can enhance their appeal in the competitive job market, and employees can secure a stable financial future.

Corporate NPS is worth considering as part of your retirement planning strategy, whether you're a business owner or an employee.