Corporate NPS makes more sense than ever—if your employer offers it

NPS is a market-linked retirement scheme that allows individuals to build a corpus through regular contributions during their working years. The accumulated amount can then be used to generate post-retirement income.

The most significant changes came in December 2025 and primarily apply to non-government subscribers. These include a higher permissible lump-sum withdrawal at retirement—80% of the corpus from 60% earlier; the tax-free portion remains capped at 60%; the mandatory annuity component has been reduced to 20% from 40%.

Exit rules have also been relaxed. Subscribers under the ‘all citizen model’ (individual NPS) can now opt for a normal exit after completing 15 years in the system or on attaining 60 years of age, whichever is earlier.

While these changes do not directly apply to corporate NPS subscribers, there is a workaround.

“In the case of corporate NPS, the retirement age defined by the organisation overrides the option of exit after completion of 15 years," said Sumit Shukla, MD and CEO, Axis Pension Fund.

The main hesitation towards NPS was the lock-in until 60 years of age and the minimum 40% annuity. “Now, both have been considerably eased. Also, no one puts all their savings in NPS, and of that, only a small part goes to an annuity," said Deepesh Raghaw, founder, PersonalFinancePlan.in and a Sebi-registered investment adviser.

Furthermore, under the new tax regime, NPS subscribers can claim a tax deduction only for their employer’s contribution and not their own. This ups the case for corporate NPS.

However, given that many companies still don’t offer NPS, this option is limited for many employees. For those it does, Raghaw recommends they exhaust it to the maximum extent of an employer’s contribution (part of an employee’s cost to company or CTC) that is tax-deductible.

How it works

Apart from central and state government employees who are covered by NPS, any Indian citizen aged 18 to 85 can invest in the scheme under the ‘all citizen model’ (individual NPS).

Companies, whether in the private or public sector, can offer NPS to their employees under the corporate sector model. Under this, the employer makes contributions towards the employee’s NPS account. The employer can claim this as a business expense and the employee as a tax deduction. Additionally, the employee can also make their own contribution.

Tax treatment is where corporate NPS clearly scores over individual NPS, especially under the new tax regime.

Under this, employees can claim a deduction for their employer’s contribution to NPS of up to 14% of basic pay plus dearness allowance (DA). This is the only NPS-related tax deduction available under the new regime. Individuals contributing to NPS on their own do not get any tax benefit.

The country’s new labour codes mandate that basic pay plus dearness allowance plus retaining allowance must be 50% of an employee’s CTC. So, employees who were below this limit can now enjoy greater tax savings as the employer’s contribution can be higher than before.

Under the old tax regime, the 14% limit for employer contributions applies only to government employees. For others, it is capped at 10%.

Additionally, employees can claim deductions for their own NPS contributions, up to the ₹1.5 lakh limit under Section 80C, plus an additional ₹50,000 under Section 80CCD(1B).

Flexibility to port under NPS

One big advantage of NPS is its portability. An NPS subscriber can move freely from one company to another, or from the private sector to the government sector, or even shift from corporate NPS to individual NPS while in the same job. They can retain the same NPS account as identified by their permanent retirement account number or PRAN.

On changing jobs, the subscriber's PRAN will be tagged to the new company once the details are shared. If the new company does not offer NPS, one can shift from corporate to individual NPS.

“Remember, you are only shifting your sector (corporate to individual), the PoP (points of presence) remains the same," said Kuldeep Parashar, co-founder and CEO, PensionBox, an NPS platform backed by Zerodha. PoPs are entities, typically banks, that help with NPS account opening, contributions and other tasks for a charge.

Why corporate NPS adoption remains low

Unlike the employee provident fund (EPF), which must be mandatorily offered by any organisation with 20 or more employees, corporate NPS is a voluntary scheme.

“NPS is not a priority for companies. Some are not even aware of it. They compare it with EPF and feel there will be a lot of compliance work, so they keep away from it," said Parashar. In reality, most compliance work is handled by the PoP, and there is no cost to the employer, he added.

The numbers highlight the gap. While 7.66 lakh companies offer EPF to their employees, only about 19,867 companies offer corporate NPS.

Almost all large corporates have adopted NPS; the difference in numbers is because of the vast number of small and medium organizations that have not registered for the scheme, said a person closely associated with NPS on condition of anonymity.

Even where NPS is adopted, enrolment at the employee level can vary widely from one company to another. In 2024-25, there were 22.75 lakh corporate NPS subscribers (employees) compared with individual NPS subscribers at 42.65 lakh.

Employees with zero tax liability under new tax regime (annual income up to ₹12.75 lakh) and younger workers prioritising higher take-home pay tend to opt out, the person said.

Experts believe NPS offers a disciplined, low-cost framework for long-term retirement savings. "NPS is a wonderful product that helps you rebalance between equity and debt without any tax implications," Raghaw said.