Corporate NPS: Why Should Employers Offer It?

Speaking at Retire Smart: Financial Wellness Leadership Series, a collaborative initiative of the Pension Fund Regulatory and Development Authority (PFRDA) and Outlook Money, A Ramesh Kumar, Assistant General Manager, PFRDA, highlighted the growth of the Corporate National Pension System (Corporate NPS) and why employers should offer it to their employees. He emphasised that the corporate model has shown significant growth, yet there remains significant headroom.

According to the data presented, the financial year 2025-26 saw a significant growth of 102.14 per cent (3,51,178 new accounts) year over year (YoY) in the Corporate NPS subscribers in 2025-26. The number of employers who registered to offer Corporate NPS to their employees also increased from 2,420 in FY2021-22 to 3,951 in FY2024-25 and to an all-time high of 5,179 in FY2025-26. Cumulative corporate subscribers have increased to 2.75 million in FY2025-26.

Corporate NPS Penetration Among Employees

Kumar highlighted the scheme’s growing adoption in Gurugram, one of India’s prominent corporate hubs. He informed that Gurugram has an estimated 581 companies, of which 403 are registered under the NPS, and 178 are yet to come on board. However, he underscored the need to improve the number of subscribers as well, saying that 268 of these registered firms under NPS currently have less than 10 per cent subscriber penetration.

The average subscriber penetration across five major corporate hubs is also less than 10 per cent. Gurugram leads with 9.71 per cent penetration, followed closely by Mumbai (9.49 per cent), Bengaluru (9.34 per cent), Delhi (7.49 per cent), and Chennai (5.29 per cent).

To enhance NPS adoption among corporate employees, PFRDA offers flexible investment options for both employers and employees.

Who Are Eligible Corporate Entities?

These include companies registered under the Companies Act 2013, co-operative societies, statutory corporations, public sector enterprises, registered partnership firms, limited liability partnerships (LLPs), proprietary concerns, and trusts and societies.

Who Can Contribute To The Scheme?

The scheme offers flexibility in who will contribute to the corporate NPS. Under the corporate NPS model, contributions can be made solely by the employer, by the employee, or by both equally or unequally.  

Investment Options Under Corporate NPS

The investment options are the same as in the other NPS investment models, in which the equity portion can go up to 100 per cent. Subscribers can change pension fund managers once in a financial year and investment choices four times in a financial year.

Benefits Of Corporate NPS For Both Employers And Employees

Kumar emphasised that the scheme offers tax benefits to both the employee and the employer. Under Section 123 of the Income-tax Act 2025, employee contributions are eligible for tax deduction up to 10 per cent of basic plus dearness allowance (DA) or 20 per cent of gross income for self-employed individuals. An additional deduction of Rs 50,000 is also available under Section 124(3) of the Act.

However, these are only under the old tax regime. The new tax regime offers tax benefits only on the employer’s contribution, up to 14 per cent of the basic plus DA.

Further, the lump sum withdrawal (60 per cent of the corpus) at the time of retirement is tax-free, and the remaining amount used for purchasing an annuity is also tax-free. Later, the annuity received every year is taxable as per tax slabs, and remains non-taxable if a retiree’s income is less than Rs 12 lakh.  

For employers, the tax deduction is available under Section 37(1) for their contribution of up to 14 per cent of basic plus DA. They can show it as a business expense under the Act.

Kumar concluded that the corporate model has greater scope to grow if employers understand the long-term benefits. Contribution under this model by them (employers) is one of the few tax deductions available under the new tax regime, which can enhance employee loyalty and lower their attrition.

As of July 31, 2026, the total subscribers under the NPS ecosystem, including the Atal Pension Yojana (APY), stand at 1,011.22 lakh subscribers, and the assets under management (AUM) at Rs 18,13,833.64 crore.