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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Corporate NPS is a government-based scheme that private employers can use to create employee pension benefits. When your employer activates the corporate NPS scheme, you can plan your retirement efficiently and build a corpus for your golden years. The scheme offers numerous benefits to the employees, including better returns and tax benefits. Being a long-term investment option, corporate NPS benefits ensure a stable future for you and your family. Here is an overview of the scheme, benefits, and features.
What is the Corporate NPS Scheme?
Corporate NPS is an employee benefit scheme private and public sector companies can activate to provide pension benefits to their employees. It differs from individual NPS, which employees can subscribe to build a corpus for their retirement gradually. Some NPS features that distinguish both include returns, tax benefits, contributions, eligibility, lock-in period, etc.
Types of Corporate NPS Schemes
Primarily, there are two types of corporate NPS schemes:
Benefits of Corporate NPS
Employees obtain numerous financial benefits of corporate NPS, including money-saving, tax benefits, corpus building, etc. It facilitates long-term retirement planning advantages with both Tier I and II accounts. These include the following:
Tax Benefits
Building Goodwill
Activating corporate NPS offers employees several NPS Tier 1 benefits, building the employer’s goodwill among them and gaining their trust and loyalty.
Corpus
A pension corpus built through the employment years helps private and public employees lead a better, more confident life after retirement.
Cost-Effective Administration
Various NPS features make administration cost-effective for corporate NPS account holders, helping them provide better employee benefits and retain their loyalty.
Features of NPS Tier 2
Kotak NPS Tier II account is one of the most feature-rich options available with the following features:
How Corporate NPS Works?
There are two types of NPS accounts – Tier I and Tier II. Tier II accounts are available for individual contributions only. Once opened, investors can choose between Active Choice and Auto Choice, with different levels of freedom to select their investment amounts and avenues. While Tier II account allows 100% withdrawal with no tax benefits, Tier I accounts have limitations on withdrawals. For instance, only 25% of the individual contribution is available for withdrawal after at least three years of constant contribution.
Eligibility Criteria for Corporate NPS
Any eligible business entity can enrol its employees under corporate NPS. A few essential documents for corporate NPS registration include the CHO-1 form, board resolution, POA, corporate PAN card copy, certificate of incorporation, and company profile sheet. Fill out an NPS registration application online or offline and sign a service legal agreement with your service provider.
Based on the employee's basic salary, the employee and the employer contribute equal amounts to the corporate NPS account. It benefits both parties significantly and builds trust among them.
Types of Accounts
Investment Options for Corporate NPS
Corporate NPS provides two investment options:
Withdrawal Rules and Regulations
Corporate NPS for Employers
Offering corporate NPS as an employee benefit has multiple advantages:
Conclusion
Companies must consider applying for a corporate NPS account to benefit their employees and gain corporate NPS benefits. Apply for registration now at Kotak and gain an edge over competitors towards employee benefits.
Frequently Asked Questions
1.) How does Corporate NPS differ from individual NPS accounts?
As the name suggests, individual NPS accounts are for individual employees only, while corporate NPS accounts are for corporate entities willing to benefit their employees.
2.) Are there any tax implications for employees contributing to Corporate NPS?
Employees contributing to corporate NPS are eligible for a tax deduction of up to Rs 1.5 Lakh plus Rs 50,000 for NPS deduction under sections 80 CCD (1) and (1B).
3.) Can employees switch between NPS Tier 1 and Tier 2?
Yes, one way switch is possible. Transferring NPS corpus from Tier 2 to Tier 1 is allowed at any point of time.
4.) What happens to the NPS account if an employee changes jobs?
If it is an individual NPS account, the employee can retain the account if they change the job. On the other hand, a corporate NPS account is linked with the company, and they need special formalities to transfer it.
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