Implementing corporate NPS

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Hi All,

We have received many requests from our employees to start NPS in our company. So, before we start the discussion with HDFC, I wanted to know few details regarding the NPS policy.

I had following questions -

  1. I would like to know whether it is mandatory, or can it be voluntary if we have corporate NPS
  2. Is there any specific percentage from employer side is mandatory
  3. How does it affect the two different tax regimes

Thank you in advance.

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Here are the answers to your questions about the National Pension System (NPS) policy:

  1. Mandatory or Voluntary:
    • NPS is voluntary for private sector employees.
    • However, if you opt for Corporate NPS, it can be made mandatory for your employees, but this needs to be specified in your company’s policy.
  2. Employer Contribution:
    • There is no specific percentage mandated by law, but employers can contribute up to 10% of the employee’s basic salary + DA.
    • Employer contributions are tax-deductible under Section 80CCD(2) of the Income Tax Act.
  3. Tax Regimes:
    • Old Tax Regime:
      • Employee contributions: Tax-deductible under Section 80CCD(1) up to ₹1.5 lakhs.
      • Employer contributions: Tax-deductible under Section 80CCD(2) up to 10% of basic salary + DA.
    • New Tax Regime:
      • Employee contributions: Not tax-deductible.
      • Employer contributions: Tax-deductible under Section 80CCD(2) up to 10% of basic salary + DA, but this benefit will be added to the employee’s income and taxed accordingly.

Before discussing with HDFC, consider the following:

  • Corporate NPS offers tax benefits and flexibility in investment choices.
  • You can customize the plan to suit your company’s needs and employee preferences.
  • Ensure compliance with regulatory requirements and communicate the benefits and features clearly to your employees.
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