Corporate National Pension Scheme - CNPS Details & Benefits

By Okbima 11 Aug 2023

Employees in the organized sector employed by organizations registered with the Corporate NPS System are eligible for Corporate NPS. PFRDA regulates Corporate NPS, which was introduced in December 2011. It is an employee-run program in which the employer makes regular payments to the employee's NPS account on the employee's behalf. Under the corporate model, workers in businesses in the public and private industries have the option to join NPS.

What is the Corporate NPS?

The National Pension Scheme has been expanded to include the Corporate National Pension Scheme (CNPS). The government has launched this effort to allow everyone to work toward long-term financial security. A corpus of assets can be amassed over time using Corporate NPS, enabling you to generate a steady income in retirement.

Your wealth can increase over time by investing in Corporate NPS. Corporate NPS donations also provide these benefits, tax advantages, long-term financial security, and secure retirement.

Eligibility Criteria for Corporate NPS

Corporate NPS eligibility is governed by the employer's choice to provide the plan. Employees of NPS-enrolled firms, including both paid and non-salaried employees in both the public and private sectors, are eligible to participate. It allows employees to save for retirement, take advantage of tax breaks, and secure financial stability. Here is the eligibility for the CNPS:

1. You must be an Indian citizen.

2. You must be between the ages of 18 and 60 to apply.

3. Employees of organizations registered under the corporate model are entitled to join NPS.

The types of organizations that can sign up for or adopt the NPS Institutional Model for the advantage of their staff members are listed below.

1. Cooperative Acts-recognized organizations

2. State Public Sector Enterprises, entities governed by the Companies Act

3. Businesses in the Central Public Sector

4. Limited Partnerships that are Registered

5. Organizations that are governed by the state legislature or the parliamentary legislature

6. Organizations that were created by a government edict, either from the federal government or a state government trust

7. Proprietorship

Types of Accounts Under Corporate NPS

Corporate NPS that are directly tied to corporate insurance. Corporate NPS (National Pension System) offers many different types of accounts to meet the demands of employees and assist them in saving for retirement. Following are the principal account categories under Corporate NPS:

Tier-I Account: This is the main NPS account and it has several limitations and tax advantages. In general, contributions to this account cannot be withdrawn until retirement, although they may qualify for tax advantages under Section 80C of the Income Tax Act (within the bounds of the law).
Tier-II Account: This is an optional savings account with greater flexibility for withdrawals than the Tier-I account. The Tier-I account offers more tax advantages for donations, but this account offers a more liquid way to save money.

What are the Features of Corporate NPS ?

The scheme is an instrument that can assist in retirement planning and financial security. You may find a complete description of the advantages and features of the Corporate NPS in the following sections.

Employer-Sponsored: Corporate NPS is offered by employers as part of their employee benefits program, making it easy for employees to participate.

Employee and Employer Contributions: Employees typically contribute a portion of their salary to the NPS account, and the employer may also make matching or fixed contributions, providing an additional savings boost.

Choice of Pension Funds: Employees can choose from a range of pension fund options managed by professional fund managers. These funds invest in various asset classes, offering the potential for higher returns.

Two-Tier Structure: Corporate NPS has a two-tier structure comprising a mandatory Tier-I account (with certain withdrawal restrictions) and a voluntary Tier-II account (providing more flexibility in withdrawals).

Portability: Employees can continue with the same NPS account even if they switch jobs, ensuring their retirement savings are portable and easily manageable.

Tax Benefits: Contributions to the Tier-I account are eligible for tax benefits under Section 80C of the Income Tax Act, subject to applicable limits. Additionally, there's a separate deduction under Section 80CCD(2) for employer contributions to the NPS.

What are the benefits of Corporate NPS account?

Corporate NPS (Net Promoter Score) offers several advantages for businesses. It provides a simple and effective metric to measure customer loyalty and satisfaction, identifies brand advocates and detractors, enables benchmarking against competitors, helps prioritize improvements, and drives customer-centric decision-making. Here are some Corporate NPS benefits:

1. This investment package is tax-efficient.

2. Salaried employees who are NPS subscribers may deduct up to 10% of their pay (Dearness Allowance plus basic pay) from their NPS contribution under Section 80CCD (1). This deduction falls under U/S Section 80C's maximum allowance.

3. According to Section 80CCD (2), an employer's contribution made on behalf of an NPS subscriber is tax deductible up to an amount not exceeding 10% of the subscriber's gross annual wage (basic salary plus dearness allowance).

4. A total deduction of every contribution made by the employer, comprising Provident Fund, Super Annuity Fund, and NPS, cannot be greater than Rs. 7.5 lacs.

5. According to Section 80CCD (1B), the subscriber can receive a tax deduction of up to Rs. 50,000 worth of additional self-contributions.

6. The tax deductions listed above are separate under various parts of the IT Act.

What are the Investment Options in Corporate NPS?

The fund allocation structure of this investment program is what the Corporate NPS investment options represent. The terms active choice and auto choice describe the two forms of corporate NPS investments.

1. Active Choice

For Corporate National Pension Scheme investment streams are available for distribution via active choice. You can decide in this section how much of your total cash will be spread among the four different investing alternatives.

1. Investments are made in fixed-income debt securities, such as corporate bonds.

2. Equity: Although this asset class is a high-risk investment, you can invest up to 75% of your portfolio.

3. Your money is invested in real estate or alternative assets like infrastructure funds. This asset class's cap may not exceed 5% of the funds.

4. Government Securities: By investing in this asset category, your investment money will purchase debt securities issued by a sovereign nation. In this asset class, you may put all of your money.

2. Auto Choice

For those with little investing knowledge, the Auto Choice in allocations of funds is an excellent choice. Depending on your age, your money will be allocated to various asset classes in a preset way. The allocation patterns are based on the following risk-appetite variables.

1. LC 75: Aggressive Life Cycle Fund

You can invest 75% of your money in stocks with this Life cycle fund until you reach the age of 35. The exposure to investments in equity is set at 75%.

2. LC 50: Moderate Life Cycle Fund.

You can invest 50% of your money in stocks with this Life cycle fund. Until you are 35, your involvement in investments in stocks is set at 50%; after that point, it steadily decreases based on your age.

3. LC 25: Conservative Life Cycle Fund

You can invest 25% of your money in stocks with this Life cycle fund until age 35 when it gradually decreases based on age. The exposure to investments in equity is set at 25%.

Conclusion

Along with provident funds, gratuities, superannuation, and other pension plans, employers may also benefit employees from the Corporate National Pension Scheme (corporate NPS). The corporate NPS approach is available to employees in both the public and private sectors. With an insurance aggregator like Okbima, you can invest in the corporate NPS model.