Corporate NPS- Tax Deducted From Your Salary? Know About This Scheme 

Corporate NPS: If you are working and looking to lessen your annual tax burden, Corporate NPS may be a suitable choice. In this plan, your employer contributes a part of your salary to your NPS account, which is tax-deductible according to regulations, applicable in both old and new tax systems.

Benefits in the new tax system

Private sector employees can get a tax deduction of up to 14% of their basic salary on employer contributions to NPS under Section 80CCD(2) in the new tax regime, compared to a 10% limit in the old regime. Central government employees have a 14% limit under both regimes. It’s important to note that this tax exemption is distinct from the exemption on an employee’s personal NPS investment, following different regulations.

Tax reduction explained

For instance, if an employee with a Rs 50 lakh CTC and Rs 25 lakh basic salary receives a Rs 3.50 lakh company contribution to NPS, this can be claimed as a deduction under Section 80CCD(2) in the new tax system. This deduction can reduce taxable income and tax liability, leading to significant tax savings. However, the company’s NPS contribution is not given as additional cash but is part of the overall salary/CTC structure, directly deposited into the NPS account.

Building a substantial retirement fund

Apart from tax benefits, Corporate NPS aids in creating a retirement corpus through long-term investments, making it a valuable tool for tax and long-term savings for retirement planning.

Continuity upon changing jobs

Employees need not close their NPS account when switching jobs since the account is transferable. If the new employer offers Corporate NPS, the employee can resume contributions based on the new company’s policies.

Considerations before opting for Corporate NPS:

Before choosing Corporate NPS, ensure that your employer provides this option and understand how the NPS amount affects your CTC. This can impact your monthly take-home pay. Corporate NPS serves as a tax-saving avenue for working individuals that can bolster their retirement savings for the future.