What is the limit on the employer NPS contribution?

Under 80CCD(2) the employer contribution is deductible up to 10% of Basic plus DA for private employees in the old regime, 14% for government employees, and 14% for everyone under the new regime. Employer PF, NPS and superannuation above 7.5 lakh a year becomes taxable.

Section 80CCD — NPS Deduction (Section 124) with Regime Comparison

Q: Which NPS deduction works in the new tax regime?

Only Section 80CCD(2), your employer contribution to NPS, deductible up to 14% of Basic plus DA in the new regime. Your own contributions under 80CCD(1) and the extra 50,000 under 80CCD(1B) are old-regime only.

Q: Is the 50,000 under 80CCD(1B) over and above 80C?

Yes. The 50,000 under 80CCD(1B) is additional, over and above the 1.5 lakh limit. Your own NPS under 80CCD(1) is counted within that 1.5 lakh shared with 80C. Claim 50,000 under 80CCD(1B) first, then use 80CCD(1) if you still have room.

Q: Should I put money into 80CCD(1B) or 80C?

If you have used your full 1.5 lakh under 80C, the 50,000 under 80CCD(1B) is genuinely extra deduction and worth funding. If not, weigh the NPS lock-in against flexible 80C options like ELSS or PPF. The tax saving per rupee is the same; the difference is liquidity and retirement structure.

The National Pension System gives three separate deductions: your own contribution under 80CCD(1), an extra ₹50,000 under 80CCD(1B), and your employer’s contribution under 80CCD(2) — the one NPS deduction that still works in the new regime. The calculator below applies the 10% / 20% and 14% caps and shows what you can claim under each regime. Stated under the Income-tax Act, 2025 (Section 124) and the Act, 1961 (Section 80CCD).

80CCD(1) — own

10% / 20%

within the ₹1.5L limit

80CCD(1B) — extra

₹50,000

over and above ₹1.5L

80CCD(2) — employer

Both regimes

10% private · 14% govt / new

Section

124

was 80CCD (Act 1961)

NPS Deduction Calculator

Switch the regime to see how your own contributions drop away but the employer’s share stays.

Your details

Tax regime

You are

Central / state government employee?

Annual Basic + DA (gross total income if self-employed)

Contributions (₹ per year)

Your own NPS contribution

Employer’s NPS contribution salaried only

Other 80C already used of the ₹1.5L limit

Your income-tax slab rate

80CCD(1) — your contribution ₹0

80CCD(1B) — extra NPS up to ₹50,000₹0

80CCD(2) — employer ₹0

Total NPS deduction₹0

Tax saved₹0

Enter your details to see the deduction under each part.

80CCD(1) is within the ₹1.5 lakh limit shared with 80C; 80CCD(1B) is an additional ₹50,000; 80CCD(2) is separate and is the only NPS piece allowed in the new regime. The employer’s total of PF, NPS and superannuation above ₹7.5 lakh a year is taxable. Tax saved includes 4% cess and assumes the deduction falls within your top slab.

The three parts of Section 80CCD (now Section 124)

NPS is unusual because it gives three distinct deductions that stack. Understanding which is which — and which survives the new regime — is where most taxpayers lose money.

Part	What it covers	Limit	Regime
80CCD(1)	Your own NPS contribution	10% of salary (Basic+DA), or 20% of gross total income if self-employed — within the ₹1.5 lakh limit shared with 80C	Old only
80CCD(1B)	Additional own NPS contribution	Extra ₹50,000, over and above the ₹1.5 lakh	Old only
80CCD(2)	Your employer’s NPS contribution	10% of salary (private), 14% (central/state government), and 14% for everyone under the new regime	Both regimes

The one that survives the new regime: if you file under the new default regime, your own contributions under 80CCD(1) and 80CCD(1B) give no deduction — but your employer’s contribution under 80CCD(2), up to 14% of Basic + DA, is fully deductible. Ask your employer to route part of your salary as an NPS contribution and you keep a real deduction even in the new regime.

Old Act 1961 vs new Act 2025 — numbering

Income-tax Act, 1961

Deduction: Section 80CCD — parts (1), (1B), (2)
Own within ₹1.5L; extra ₹50,000; employer 10% / 14%
80CCD(2) allowed in both regimes
Applies for FY 2025-26 and earlier

Income-tax Act, 2025

Deduction: Section 124
Limits and structure unchanged
Employer 80CCD(2) still the new-regime survivor
Applies from Tax Year 2026-27 (1 April 2026)

Section numbers reflect the Income-tax Act, 2025 in force from 1 April 2026. The 10% / 20% / 14% caps, the ₹50,000 under 80CCD(1B) and the regime treatment carry forward from Section 80CCD. Confirm the live reference on the income-tax portal before filing.

A worked example

Anil, salaried, Basic + DA ₹10,00,000, old regime (30% slab)

Own NPS ₹1,00,000; 80C already ₹1,00,000 used
80CCD(1B) — extra ₹50,000	₹50,000
80CCD(1) — own, within remaining ₹50,000 of the ₹1.5L	₹50,000
80CCD(2) — employer ₹1,00,000 (10% of ₹10L)	₹1,00,000
Total NPS deduction	₹2,00,000
Tax saved (30% + 4% cess)	₹62,400

In the new regime, Anil loses the ₹50,000 + ₹50,000 of own contributions, but his employer’s ₹1,00,000 still qualifies under 80CCD(2) — and there the cap is 14% of salary (₹1,40,000), so an employer could route even more.

Related tools and guides

All income tax deductions → Section 80C optimiser → Section 80D — health insurance → NPS retirement corpus calculator → Old vs new regime advisor →

Frequently asked questions

Which NPS deduction works in the new tax regime?

Only Section 80CCD(2) — your employer’s contribution to your NPS, deductible up to 14% of Basic + DA in the new regime. Your own contributions under 80CCD(1) and the extra ₹50,000 under 80CCD(1B) are old-regime only. This makes an employer NPS contribution the most valuable salary-structuring move for anyone on the new regime.

Is the ₹50,000 under 80CCD(1B) over and above 80C?

Yes. The ₹50,000 under 80CCD(1B) is an additional deduction over and above the ₹1.5 lakh limit. Your own NPS under 80CCD(1), by contrast, is counted within that ₹1.5 lakh, which is shared with 80C. So the smart order is to claim ₹50,000 under 80CCD(1B) first, then use 80CCD(1) only if you still have room in the ₹1.5 lakh.

What is the limit on the employer’s NPS contribution?

Under 80CCD(2), the employer’s NPS contribution is deductible up to 10% of Basic + DA for private-sector employees in the old regime, 14% for central and state government employees, and 14% for everyone under the new regime. Any employer contribution above that percentage — and any total of PF, NPS and superannuation above ₹7.5 lakh a year — becomes taxable.

Can a self-employed person claim NPS deductions?

Yes, under the old regime. A self-employed individual can claim 80CCD(1) up to 20% of gross total income (within the ₹1.5 lakh limit) and the extra ₹50,000 under 80CCD(1B). There is no 80CCD(2) for the self-employed because there is no employer, so the new regime gives them no NPS deduction.

Do the NPS rules change under the Income-tax Act, 2025?

The structure is unchanged. From Tax Year 2026-27 the provision is renumbered Section 124, but the three parts, the 10% / 20% / 14% caps, the extra ₹50,000 and the both-regimes treatment of the employer’s contribution are the same as the old Section 80CCD.

Should I put money into 80CCD(1B) or 80C?

If you have already used your full ₹1.5 lakh under 80C, the ₹50,000 under 80CCD(1B) is genuinely extra deduction, so it is worth funding. If you have not used your 80C limit, weigh the NPS lock-in (until 60, largely) against more flexible 80C options such as ELSS or PPF. The tax saving is the same rupee-for-rupee; the difference is liquidity and the retirement-income structure of NPS.

This page is a general guide for individual taxpayers and is not tax advice. Eligibility, limits and regime treatment depend on your specific facts. Section references to the Income-tax Act, 2025 (Section 124) apply from Tax Year 2026-27 (FY 2026-27); the Income-tax Act, 1961 (Section 80CCD) applies for FY 2025-26 and earlier. Verify the current position on the income-tax portal or with your advisor before filing.

Section 80CCD — NPS Deduction (Section 124)