Corporate NPS in India: How Employer-Assisted Retirement Contributions Work
When you hear "retirement plan" in India, most people think of fixed deposits or gold. But a quiet revolution is happening in corporate offices across Bangalore, Pune, and Delhi - one where employers are quietly boosting their employees’ future by contributing directly to the National Pension System (NPS). It’s not a bonus. It’s not a one-time payout. It’s a long-term, tax-efficient, government-backed retirement engine built into your salary structure.
What Exactly Is Corporate NPS?
The National Pension System started in 2004 as a voluntary scheme for government employees. By 2009, it opened to all Indian citizens. But in the last five years, something changed: companies began using NPS as a formal part of their employee benefits package. This is called Corporate NPS - where your employer makes contributions to your NPS account, on top of your own.
It’s not optional for the employer in this setup. Once a company signs up for Corporate NPS, they’re legally required to contribute a fixed percentage of your basic salary - usually between 10% and 15%. You, as the employee, also contribute a matching amount, typically 10%. That means if you earn ₹60,000 a month and your basic salary is ₹30,000, your employer adds ₹3,000-₹4,500 to your NPS account every month. You add ₹3,000. That’s ₹6,000-₹7,500 going into your retirement fund each month, automatically.
Why Companies Are Doing This
Why would a company care about your retirement? Simple: retention. In India’s tight labor market, top talent is walking away for better benefits. Companies like Infosys, TCS, HCL, and even mid-sized firms like Zomato and Paytm now list NPS contributions in their job offers. It’s a quiet differentiator.
It’s also cheaper than giving cash bonuses. A ₹5,000 monthly NPS contribution from your employer costs the company ₹5,000 - but you get a ₹1,500 tax break on your end. That’s ₹1,500 the company doesn’t have to pay in payroll taxes. The government incentivizes this with Section 80CCD(2) of the Income Tax Act, which lets employers deduct their NPS contributions from their taxable income.
For employees, it’s not just about the money. It’s about security. A 2024 survey by Mercer found that 68% of Indian employees aged 28-45 felt more loyal to employers who contributed to NPS. That’s higher than those who valued health insurance or flexible hours.
How It Works: The Mechanics
Corporate NPS isn’t a separate account. It’s your existing NPS Tier-I account - the one you opened online through a Point of Presence (PoP) like Karvy, NSDL, or a bank. Your employer links your PAN and NPS account number to their payroll system. Every month, your contribution and theirs get auto-debited and deposited into your NPS account.
You can’t withdraw this money before 60. That’s the rule. But here’s the catch: you can withdraw up to 60% as a lump sum at retirement, and the rest must go into an annuity - a monthly pension. The annuity is not fixed. It depends on how much you saved and the interest rates when you retire.
You get to choose how your money is invested. You can pick between:
- Active choice: You decide how much goes into equity (up to 75%), corporate bonds, or government securities
- Auto choice: The system shifts your portfolio from aggressive (more equity) to conservative (more bonds) as you age
Most young employees pick active choice. They want growth. By 45, many switch to auto to reduce risk.
What You Save: Tax Breaks That Add Up
Let’s say you’re 30, earning ₹12 lakh a year, with a ₹6 lakh basic salary. Your employer contributes 12% - that’s ₹72,000 a year. You contribute 10% - ₹60,000.
Your total NPS contribution: ₹1,32,000.
Under Section 80C, you can claim up to ₹1.5 lakh for savings. But NPS has its own limit: ₹50,000 under Section 80CCD(1B), on top of the ₹1.5 lakh. So you claim ₹50,000 for your own contribution. Your employer’s ₹72,000 is fully deductible for them - and doesn’t count as your income. That means your taxable income drops by ₹60,000. No tax on that.
Over 30 years, with 8% annual returns, your ₹1.32 lakh yearly contribution grows to ₹1.6 crore. That’s not a fantasy. That’s compound growth. And it’s all tax-free at withdrawal, thanks to the EEE status (Exempt-Exempt-Exempt) of NPS.
Who Can Join? And Who Shouldn’t?
Corporate NPS is open to all Indian citizens employed in the private sector. You need a PAN, Aadhaar, and a bank account. No medical tests. No underwriting.
But it’s not for everyone.
If you plan to leave India before 60, NPS becomes tricky. You can withdraw early only if you move abroad permanently - and even then, you must transfer the funds to an overseas account, which adds complexity. If you’re a freelancer or gig worker, you can still open NPS yourself - but you won’t get the employer match.
And if you need liquidity? NPS isn’t for you. You can’t take a loan against it. You can’t withdraw for emergencies. It’s locked in. That’s the trade-off: discipline for growth.
Real Stories: What Employees Are Saying
Rahul, 34, works at a fintech startup in Hyderabad. He joined in 2022. His employer contributes 15% of his ₹45,000 basic salary - ₹6,750/month. He matches it. He didn’t think much of it at first. Now, his NPS balance is ₹18.3 lakh. He didn’t save a rupee outside of it. "I didn’t even realize how much I had," he says. "I just saw the amount grow every month. Now I’m thinking about retiring in my 50s. That wasn’t possible before."
Meera, 41, works in a manufacturing firm in Chennai. She didn’t know NPS existed until her company rolled it out in 2023. She was skeptical. "I thought it was another deduction." But after seeing her balance hit ₹11.5 lakh in two years, she changed her mind. "I used to think retirement was for old people. Now I see it as my future self’s salary."
What’s Missing? The Gaps in Corporate NPS
It’s not perfect. Many small companies still don’t offer it. Only 12% of private sector employees in India have employer contributions to NPS, according to PFRDA data from 2025. Most are in IT, finance, and large manufacturing.
There’s no portability guarantee. If you switch jobs, your NPS account stays - but your new employer might not contribute. You’ll have to keep funding it yourself. That’s a problem for job-hoppers.
And annuity rates? They’re low. Current annuity returns hover between 5.5% and 7%. That’s not enough to beat inflation long-term. So many people are now investing the lump sum they get at 60 into other assets - mutual funds, real estate - to keep growing.
What You Should Do Right Now
If your company offers Corporate NPS:
- Confirm your employer’s contribution percentage - it’s usually in your offer letter or HR handbook
- Log into your NPS account via the NSDL or Karvy portal
- Choose your investment mix - active or auto
- Set up auto-rebalancing every year
- Check your balance every six months - it’s your most important financial dashboard
If your company doesn’t offer it - ask. Not as a complaint. As a suggestion: "Many peers in our industry get employer contributions to NPS. Would it be possible to explore this?" Companies that listen are the ones people stay with.
Is NPS the Only Option?
No. But it’s the only one where your employer pays for you - and the government backs it. EPF is another option, but it’s capped at ₹15 lakh employer contribution over a lifetime. NPS has no cap. You can keep adding more. And unlike EPF, NPS lets you invest in equities - which historically deliver 10-12% returns over 20+ years.
PPF is safe but slow. Mutual funds are flexible but you pay the full cost. NPS is the only hybrid: low cost, tax-efficient, employer-supported, and scalable.
This isn’t about saving for retirement. It’s about building a second income stream - one that starts growing the day you join a company that cares enough to pay into it.
Can I opt out of Corporate NPS if my employer offers it?
No, you cannot opt out if your employer has enrolled you in Corporate NPS. The employer’s contribution is mandatory under the scheme’s rules. However, you can choose to stop your own contribution. But if you do, you’ll lose the matching employer contribution - which means you’re leaving free money on the table.
What happens to my NPS account if I change jobs?
Your NPS account stays active. It’s linked to your PRAN (Permanent Retirement Account Number), not your employer. When you join a new company, you just need to provide your PRAN. If the new employer also offers NPS, they’ll start contributing. If not, your account remains open - you can keep funding it yourself, or leave it untouched until retirement.
Is Corporate NPS better than EPF?
It depends. EPF gives you guaranteed returns (currently 8.25%) and allows partial withdrawals for emergencies like medical bills or home loans. NPS offers higher growth potential through equity exposure and no cap on contributions. But NPS has stricter withdrawal rules and lower annuity rates. If you want flexibility, EPF wins. If you want long-term growth and tax efficiency, NPS wins - especially with employer contributions.
Can I invest more than my employer’s contribution in NPS?
Yes. You can contribute up to ₹50,000 extra per year under Section 80CCD(1B), on top of your ₹1.5 lakh limit under Section 80C. Many employees who get employer contributions still top up their NPS with additional savings - especially if they’re in a higher tax bracket. The more you put in, the more you benefit from tax savings and compound growth.
How do I check my NPS balance?
You can check your NPS balance online through the official NPS portal (www.nps.org.in) or via the NSDL or Karvy apps. You’ll need your PRAN and a registered mobile number. Your monthly contribution details are also sent via SMS and email. Most employers also show your NPS contribution in your payslip.
What if I retire before 60?
You can only withdraw before 60 if you’re permanently relocating abroad or if you become permanently disabled. Otherwise, early withdrawal is not allowed. If you do qualify for early exit, you must use at least 80% of your corpus to buy an annuity. Only 20% can be taken as a lump sum - and it’s taxable. That’s why most people wait until 60.
