The Corporate National Pension Scheme (CNPS) in India is a voluntary retirement savings scheme for employees of the corporate sector. It is a defined contribution scheme, meaning that both the employer and employee contribute a certain amount of money towards the employee's retirement savings.
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†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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.
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.
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
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.
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
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.
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 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.
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.
| Basis of Comparison | National Pension Scheme (NPS) | Corporate National Pension Scheme (CNPS) |
| Applicability | Available to all citizens of India, including employees from the private, public, and unorganized sectors | Only available to employees of specific corporations or organizations that have opted for the CNPS |
| Sponsorship | Sponsored by the Government of India | Sponsored by the corporate or organization offering the CNPS |
| Management | Regulated by the Pension Fund Regulatory and Development Authority (PFRDA) | Managed by a trustee appointed by the sponsoring corporation or organization |
| Contribution | Individual and employer contributions are mandatory and determined by the subscriber | Contributions are determined and paid by the sponsoring corporation or organization |
| Investment Choice | Subscribers have the freedom to choose from different asset classes and fund managers | Investment options are predetermined by the sponsoring corporation or organization |
| Tax Benefits | Contributions made by the subscriber and the employer are eligible for tax deductions under Section 80C of the Income Tax Act | Contributions made by the employer are eligible for tax deductions under Section 80CCD(2) of the Income Tax Act |
| Withdrawals | Partial withdrawals are allowed after the completion of three years of subscription | Withdrawals are subject to the terms and conditions of the CNPS trust deed |
| Annuity | Subscribers are required to use at least 40% of the accumulated corpus to purchase an annuity from a PFRDA-approved insurer | Annuity purchase is subject to the terms and conditions of the CNPS trust deed |
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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