- Employer NPS is deductible up to 14% of salary under the new regime and 10% under the old regime for private employers.
- Your contributions to PF, NPS and superannuation above ₹7.5 lakh a year in total are taxable under section 17(1)(h).
- Since PFRDA’s December 2025 changes, non-government subscribers can take up to 80% as a lump sum at normal exit.
- NPS is voluntary. Unlike EPF, no law makes you offer it.
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How does corporate NPS work for employees?
You register as a corporate under NPS, then pay a chosen percentage of each employee’s salary into their account every month.
The employee picks a pension fund and an investment mix. Money stays invested until normal exit, which for corporate subscribers runs to retirement. At exit, up to 80% can be taken as a lump sum and at least 20% buys an annuity, with full withdrawal allowed for a small corpus up to ₹8 lakh.
NPS for employees works best as an add-on to the Employees’ Provident Fund, not a substitute. EPF is statutory. NPS isn’t.
How much tax does employer NPS save?
For a senior hire on the new regime, a meaningful amount, because s.124 is one of the few deductions the new regime keeps.
Section 124 of the Income-tax Act, 2025 on pension contributions raises the private-employer limit from 10% to 14% when income is taxed under s.202(1), the new regime. “Salary” here means basic plus dearness allowance, not CTC.
Let’s say a Pune engineering director has basic of ₹1,50,000 a month, so ₹18 lakh a year, and pays the 30% slab.
| Step | Figure |
|---|---|
| Employer NPS at 14% of ₹18 lakh | ₹2,52,000 |
| Employer PF (12% of ₹25,000 × 12) | ₹36,000 |
| Total under the ₹7.5 lakh cap? | Yes, ₹2,88,000 |
| Tax saved at 30% plus 4% cess | About ₹78,624 a year |
Restructuring CTC so part of it goes to NPS is common. It doesn’t raise your cost if the CTC stays the same. Compare both old and new tax regimes first.
What’s the common NPS mistake for foreign employers?
Forgetting the ₹7.5 lakh aggregate cap when you add NPS on top of PF and a superannuation fund.
The perquisite rules in section 17 tax the excess above ₹7,50,000 and the annual accretion linked to it. At very high salaries, 14% NPS alone can breach it. Check the total before you set the rate.
How does Remunance run NPS for your India team?
Remunance can add corporate NPS to payroll as part of benefits administration, deducts it inside the 14% or 10% limit and shows it on the payslip. Contributions are passed through at cost. Our EOR cost calculator for India shows how NPS fits a CTC. To model the tax saving for your senior hires, request a CTC structuring review.
What else do people ask about corporate NPS?
Is NPS mandatory for private employees in India?
No. Corporate NPS is a non-statutory benefit you choose to offer. EPF remains the compulsory retirement scheme.
Is employer NPS contribution allowed in the new tax regime?
Yes. Section 124 deductions survive the new regime, at up to 14% of salary for all employers.
How much NPS can be withdrawn at retirement?
Non-government subscribers can take up to 80% as a lump sum, with at least 20% in an annuity. A corpus up to ₹8 lakh can be withdrawn in full.
Planning a hire in India?
Our founding team has run payroll and hiring in India for 22+ years, first as Remunance Systems, which was later acquired by ADP.