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The additions under the corporate segment in the national pension system dropped 21.5% in the year 2023 as compared to 2022.

The drop can be attributed to the fact that the union budget for 2023-24 raised the exemption limit  to Rs 7 lakh. This may have led employees to not opt for NPS, a report in the Business Standard said on Monday.

According to the data by Ministry of Statistics and Programme Implementation (MoSPI), the corporate segment saw addition of 1,58,212 subscribers in 2023, down from 2,01,517 in 2022. This segment mainly comprises employees in the public sector, public sector banks and private limited companies, among others.

“People enrolled under the corporate component of the NPS to take tax benefits see it as a tax-saving instrument rather than a long-term pension or savings product. So, when the finance ministry raised the exemption limit in the last Union Budget, people belonging to these income slabs saw no incentive to enrol under the NPS. That is what explains this sharp decline in enrolment,” an official told the newspaper.

Under the new income tax regime, the exemption limit was raised to Rs 7 lakh from Rs 5 lakh, which mean that a person earning less than Rs 7 lakh annually need not invest to claim exemptions. And, the entire income would be tax free irrespective of the quantum of investment made by such an individual.

Managed by the Pension Fund Regulatory and Development Authority (PFRDA), the NPS came into effect from January 2004 for central government employees, except the armed forces. It is designed on a defined contribution basis as both the subscriber and employer contribute equally to a person’s account.