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    NPS deductions (Section 80CCD) (80CCD)

    The National Pension System gives three distinct deductions. Section 80CCD(1) is your own contribution, but it sits inside the Rs 1.5 lakh Section 80C ceiling. Section 80CCD(1B) is an additional Rs 50,000 over and above that ceiling. Section 80CCD(2) is your employer's contribution (up to 10% of salary, 14% for central government), which is uncapped by the Rs 1.5 lakh limit and is the one NPS deduction that also works under the new regime, making it the key salary-structuring lever.

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    What this relief is, in plain English

    NPS is the one place the new regime still gives a meaningful deduction, through employer contributions. Your own NPS money gives you two routes: it counts towards the crowded Rs 1.5 lakh 80C box (80CCD(1)), and there is a separate Rs 50,000 just for NPS on top (80CCD(1B)). But the powerful one is 80CCD(2): if your employer routes part of your package into NPS, that contribution is deductible up to 10% of salary, does not eat into the Rs 1.5 lakh, and survives even if you choose the new regime. For salaried people, restructuring CTC to include employer NPS is one of the few new-regime tax levers left.

    How it works

    Your own contribution: (1) and (1B)

    80CCD(1) covers your own NPS contribution but shares the Rs 1.5 lakh ceiling with 80C and 80CCC, so if your 80C is already full it adds nothing. 80CCD(1B) is the genuinely extra one, up to Rs 50,000 over and above the Rs 1.5 lakh. Both are old-regime only.

    Employer contribution: (2)

    80CCD(2) covers your employer's contribution to your NPS, deductible up to 10% of salary (basic plus DA), or 14% for central-government employees. It does not count towards the Rs 1.5 lakh ceiling, and it is allowed even under the new regime, which is what makes it the standout NPS deduction.

    Salary structuring

    Because 80CCD(2) survives the new regime and is uncapped by 80C, restructuring your CTC so the employer contributes to NPS can reduce tax without changing your gross package, a rare lever for new-regime salaried taxpayers.

    Who qualifies

    Interactions with other reliefs

    Section 80C

    80CCD(1) shares the Rs 1.5 lakh ceiling; 80CCD(1B) is separate on top

    New regime

    80CCD(1) and (1B) are forfeited under the new regime; 80CCD(2) survives

    Salary structuring

    Employer NPS under 80CCD(2) is the main new-regime tax lever for salaried taxpayers

    Common mistakes + audit triggers

    Worked example

    Kiran, Hyderabad - salaried manager on the new regime (2026-27)

    Kiran is on the new regime, where her 80C and 80CCD(1B) give nothing. Her employer agrees to route 10% of her basic salary into NPS under 80CCD(2).

    Calculation: Under the new regime, Kiran's own 80C and 80CCD(1B) contributions are not deductible. But the employer NPS contribution under 80CCD(2), up to 10% of her basic salary, IS deductible even in the new regime, and does not count towards any Rs 1.5 lakh ceiling. By restructuring part of her CTC into employer NPS, she reduces her taxable salary without changing her gross package, the rare deduction lever that survives the new regime.

    Statute reference: Income-tax Act 2025 s.124 (Income-tax Act 1961 s.80CCD) s.80CCD(1) within 80CCE Rs 1.5 lakh; 80CCD(1B) extra Rs 50,000; 80CCD(2) employer. Source / notes: 80CCD(2) available in BOTH regimes; 80CCD(1) and (1B) old regime only.

    Frequently asked questions

    What are the three NPS deductions?+
    80CCD(1) is your own contribution, inside the Rs 1.5 lakh 80C ceiling. 80CCD(1B) is an extra Rs 50,000 on top of that ceiling. 80CCD(2) is your employer's contribution, up to 10% of salary (14% for central government), which does not count towards the Rs 1.5 lakh and is allowed even under the new regime.
    Does NPS help under the new regime?+
    Only the employer contribution. 80CCD(1) and 80CCD(1B), your own contributions, are old-regime only. But 80CCD(2), the employer's NPS contribution up to 10% of salary, is deductible even under the new regime. That makes restructuring CTC to include employer NPS one of the few tax levers left for new-regime salaried taxpayers.
    Is 80CCD(1B) inside or on top of the Rs 1.5 lakh?+
    On top. 80CCD(1B) is an additional Rs 50,000 over and above the Rs 1.5 lakh 80C/80CCE ceiling. 80CCD(1), by contrast, shares that ceiling. A common error is counting the Rs 50,000 inside the Rs 1.5 lakh, which understates your total deduction.
    How much employer NPS can be deducted?+
    Up to 10% of your salary (basic plus dearness allowance) for private-sector employees, or 14% for central-government employees, under 80CCD(2). It is uncapped by the Rs 1.5 lakh 80C limit and survives the new regime, but the contribution must stay within the 10%/14% of salary limit to be fully deductible.

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