What Is Corporate NPS? A Smarter Retirement Plan for Employees with Over ₹2 Lakh in Tax Benefits

Corporate NPS (National Pension System) is becoming an increasingly popular retirement savings option among salaried employees in India. While the standard NPS is a well-known government-backed pension scheme aimed at building a retirement corpus, the corporate version offers unique advantages for both employers and employees — including significant tax deductions and flexible investment options.

Let’s break down how Corporate NPS works, what benefits it offers, the rules to keep in mind, and why it's a smart financial move for long-term wealth building.

How Corporate NPS Works

Under the Corporate NPS model, both the employee and employer contribute to the individual’s pension account. While the exact maturity amount is not guaranteed — as it depends on contributions and market performance — the long-term benefits can be substantial.

Each subscriber is assigned a unique Permanent Retirement Account Number (PRAN) — a 12-digit identifier that stays with them throughout their career and across employers.

This model is designed for organizations that want to offer structured retirement benefits. It is accessible to:

• Private and public companies

• Partnership firms

• LLPs

• Proprietorships

• Trusts and cooperative societies

Flexibility Even If You Change Jobs

One of the key features of Corporate NPS is portability. If you leave your job:

• You can continue contributing under the same PRAN if your next employer is also registered under NPS.

• If the new employer isn’t registered, you can still maintain your NPS account under the All Citizens Model.

• Even if you resign within five years of joining, your employer’s contributions remain safe and cannot be forfeited.

You can also transition your account between the government and corporate models, or switch to the All Citizens Model if you become self-employed.

Investment Options and Customization

Corporate NPS gives employees the option to choose from a range of fund managers and investment classes:

• Equity funds

• Corporate bonds

• Government securities

You can opt for active choice (manually selecting allocation) or auto choice, where your asset mix is automatically adjusted based on your age — reducing risk as you approach retirement.

Tax Benefits: Over ₹2 Lakh in Deductions

One of the most appealing features of NPS is its tax efficiency under the old tax regime:

Section Benefit Type Maximum Deduction

80CCD(1)	Employee’s contribution	Up to ₹1.5 lakh
80CCD(1B)	Additional deduction	₹50,000 (over and above 80C)
80CCD(2)	Employer’s contribution	Up to 10% of salary (14% for govt employees, tax-free)

These tax savings can exceed ₹2 lakh per year, making NPS a powerful tool for reducing taxable income while building retirement wealth.

Tier I vs Tier II Accounts: What’s the Difference? Feature Tier I Tier II

Minimum opening deposit	₹500	₹1,000
Minimum per deposit	₹500	₹250
Minimum annual deposit	₹1,000	No minimum
Withdrawals	Restricted until retirement	Fully flexible

• Tier I is mandatory and designed for retirement.

• Tier II is a voluntary savings account with full liquidity.

Withdrawal Rules and Retirement Benefits

At retirement (age 60):

• 60% of the corpus can be withdrawn tax-free as a lump sum.

• The remaining 40% must be used to purchase an annuity, which provides monthly pension income.

Partial withdrawals are allowed before retirement for specific needs such as:

• Medical emergencies

• Higher education

• Marriage

If you choose to exit NPS before age 60, only 20% can be withdrawn as a lump sum, while 80% must go into annuity.

Final Thoughts: Why Corporate NPS Is a Smart Choice

Corporate NPS is not just another retirement plan — it's a structured, flexible, and tax-advantaged savings tool that allows employees to prepare for a financially secure future. With the support of employers and government incentives, Corporate NPS stands out as a top-tier option for long-term retirement planning in India.

Whether you’re in a government job, private sector, or even self-employed, Corporate NPS can offer peace of mind, consistent growth, and tax savings — all in one powerful package.