The deductions
| Section | What | New regime | Old regime |
|---|---|---|---|
| 80CCD(2) | Employer’s contribution | ✔ up to 14% of basic + DA | ✔ up to 10% (14% government) |
| 80CCD(1) | Your contribution | ✘ | ✔ within the ₹1.5 lakh 80C limit |
| 80CCD(1B) | Your extra contribution | ✘ | ✔ up to ₹50,000 more |
Example: basic ₹50,000 a month
If your employer restructures ₹7,000 a month of your CTC as NPS (14% of ₹50,000), that is ₹84,000 a year deducted from your taxable income in either regime. In the 30% slab that saves about ₹26,208 of tax including 4% cess; in the 20% slab about ₹17,472. You lose nothing in take-home other than the amount itself, which goes into your retirement pot.
In the old regime you could also put ₹50,000 of your own money into NPS under 80CCD(1B), saving up to ₹15,600 more at 30% (plus cess).
Limits to remember
- Employer contributions to NPS + EPF + superannuation are tax-free only up to ₹7.5 lakh a year in total; above that, the excess and its growth become perquisites.
- The deduction is on the employer’s contribution actually paid, so it must appear in your Form 16.
- These limits carry over unchanged into the Income-tax Act, 2025 from 1 April 2026.
The pre-filled plan
Age 32, ₹1 lakh in NPS, ₹6,000 a month from you and ₹7,000 from your employer, both rising 5% a year, at 10%: corpus at 60 about ₹3,87,59,479, with a pension of about ₹38,759 a month from a 20% annuity.
How to ask for employer NPS
Corporate NPS is optional for employers, but many offer it as part of a flexible benefits plan. You usually choose an amount at the start of the year — up to 14% of basic + DA — and it is shifted from your taxable salary into NPS. Ask HR whether your employer is registered under the NPS Corporate Model; if not, you can still open an account yourself, but only the old regime lets you deduct your own contributions.
Remember the trade-off: money in NPS Tier I is locked until 60 (with limited partial withdrawals), so do not put in more than you can leave alone. If you are in the 5% or 10% slab, or under the ₹12 lakh rebate limit in the new regime, the tax saving is small and flexibility may matter more. Compare both regimes with the income tax calculator before deciding.
Key NPS figures (checked 5 November 2026)
| Item | Figure |
|---|---|
| Lump sum at 60 (corpus above ₹12 lakh) | Up to 80%; at least 20% annuity |
| Corpus ₹8–12 lakh | Up to ₹6 lakh lump sum |
| Corpus up to ₹8 lakh | 100% lump sum allowed |
| Tax-free share of corpus | 60% |
| Employer contribution deduction (new regime) | Up to 14% of basic + DA |
| Employer PF + NPS + super tax-free cap | ₹7.5 lakh a year |
FAQ
Can I claim NPS in the new tax regime?
Only the employer’s contribution under 80CCD(2), up to 14% of basic + DA. Your own contributions are not deductible in the new regime.
How much tax does ₹84,000 of employer NPS save?
About ₹26,208 in the 30% slab including 4% cess, or ₹17,472 in the 20% slab.
What corpus does this plan build?
About ₹3,87,59,479 at 60 with ₹13,000 a month in total rising 5% a year at 10%.
Sources (checked 5 November 2026): PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025 (December 2025; reported by Business Today, Upstox and Value Research); Income-tax Act provisions on NPS — 60% exemption of lump sum (s.10(12A) of the 1961 Act, continued in the 2025 Act), 80CCD(1), 80CCD(1B), 80CCD(2) at 14% in the new regime; Finance Act 2026. Returns are assumptions, not PFRDA data.